Reference no: EM133095535

Question - Besi Putih Bhd is a reputable mining company in Malaysia. The company has made a payment of RM5,400,000 for a mining property in Bukit Besi. For the purpose of that work, during 2016 Besi Putih Bhd undertook the following pre-production activities:

Activity	Cost (RM)
Exploratory drilling	320,000
Trenching and sampling	360,000

In early 2017, the company estimated that the Bukit Besi area of interest would yield economically recoverable reserves totalling 20 million tonnes of iron ore. Operation are expected to last for 40 years at the Bukit Besi area of interest once production commences. It is estimated that the land have a residual value of RM40,000 after the iron ore deposit is exhausted. Besi Putih Bhd incurred a development cost of RM560,000 during 2017.

In addition to the development costs, the company also undertook the following capital investment in 2017 as follows:

Asset	Cost (RM)	Estimated Life (Years)
Mine building	400,000	80
Railroad and associated equipment	1,400,000	50
Other mine equipment	240,000	20

The buildings, railroad and associated equipment cannot be economically removed from the mine location, but the other mine equipment can be removed and has alternative uses. Operations commenced on 1 January 2018 and are summarised as below:

Tonnes of iron ore mined	1,000,000
Tonnes of iron ore sold at RM4 per tonne	800,000
Production costs (excluding depreciation and amortisation)	RM1,900,000
Administration expenses	RM200,000
Selling expenses	RM120,000
Income tax expense	RM196,920

The annual reporting date for Besi Putih Bhd is 31 December. The company used the full cost method to treat pre-production cost. The company determined its depreciation and amortization charges based on production basis.

Required - Prepare the Statement of Profit and Loss and Other Comprehensive Income for Besi Putih Bhd by showing the net profit after tax for the year ended 31 December 2018. Show all the calculations.