Reference no: EM133119503
Question - Maju jaya Bhd is a furniture manufacturer located in Bandar Jengka. Due to increase in the demand of their newly designed furniture, the company decided to build a new plant. The construction started on 1 January 2020, and completed within 12 month.
The plant was constructed using the company's own resources, which includes:
|
RM
|
|
Direct material
|
2,560,000
|
|
Direct labour
|
1,500,000
|
|
General administrative overheads
|
300,000
|
|
Direct overheads
|
500,000
|
|
Materials wastage
|
60,000
|
|
Engineer and architect fees
|
250,000
|
The company decided to provide the depreciation on the new plant at 10% per annum on its cost, based on monthly basis. Maju jaya Bhd closes its books on 31 December each year.
Required -
a. Identify whether the new constructed plant is as an asset of the company.
b. Describe whether the new plant is an item of property, plant and equipment in accordance with MFRS 116 Property, Plant and Equipment.
c. i. Compute the initial cost of the new plant constructed by Maju jaya Bhd.
ii. Calculate the depreciation of the new plant as at 31 December 2021.
iii. Briefly described any TWO (2) factors that may limit the useful life a PPE.