Reference no: EM132919263

Momo Manufacturing is a growing manufacturing company in Malaysia. Due to an increase in demand, Momo has decided to purchase additional lorries to ensure efficient delivery of manufacturing items. On 5 November 2014, the company purchased a lorry at a cost of RM 440,000. In addition, the company incurred road tax of RM 3,500, insurance cost of RM 4,500 and painting of company's logo of RM 1,500. The company also incurred maintenance cost of RM2,500 on the lorries after the purchase.

The company depreciates motor vehicle at 20% per annum using straight line method on monthly basis. Momo Manufacturing closes its books on 30 June each year.

Problem 1: Explain briefly the term Property, plant and equipment in accordance to MFRS 116.

Problem 2: Explain whether the purchased lorry fulfils the recognition criteria of PPE in accordance to MFRS 116.

Problem 3: Explain 2 factors that should be considered by Momo Manufacturing in determining the useful life of an asset.

Problem 4: Explain the initial cost of the lorry above to be recognized in the Statement of Financial Position.

Problem 5: Calculate the initial cost of the lorry.