Calculate the initial cost of the lorry

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Reference no: EM132905553

Sure-Reach Services is a growing courier company. It provides services of delivering documents and parcels to all over Malaysia. Due to increase in demand, Sure-Reach Services has decided to purchase additional lorries so as to ensure efficient delivery.

  • On 1 October 2013, the company has purchased a lorry at a cost of RM330,000. In addition, the company incurred road tax of RM3,000, insurance cost of RM5,000 and cost of painting company's logo of RM2,000. The company has also incurred maintenance cost of RM3,500 on the lorries after the purchase.
  • The company depreciates motor vehicle at 20% per annum using straight line method on monthly basis. Sure-Reach Services closes its books on 30 June each year.

Required:

Problem a. Explain briefly the term Property, plant and equipment in accordance to MFRS 116 Property, Plant and Equipment.

Problem b. Explain whether the purchased lorry fulfils the recognition criteria of Property, plant and equipment in accordance to MFRS 116 Property, Plant and Equipment.

Problem c. Explain TWO (2) factors that should be considered by Sure-Reach Services in determining useful life of an asset.

Problem d. Explain the initial cost of the lorry above to be recognized in theStatement of Financial Position.

Problem e. Calculate the initial cost of the lorry.

Problem f. Calculate the depreciation expense for lorry as at 30 June 2014.

Reference no: EM132905553

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