FRS40 FRS23 FA Note Tutorial Qns Oct 2024 PDF

**NGEE ANN POLYTECHNIC** **SCHOOL OF BUSINESS & ACCOUNTANCY** **CORPORATE REPORTING** **WORKSHOP: FRS 40 INVESTMENT PROPERTY; FRS 23 BORROWING COSTS; NOTE TO THE FINANCIAL STATEMENTS -- FIXED ASSETS** **[Question 1]** **Brighton Pte Ltd is a manufacturer and wholesaler of furniture. Indicate wi...

**NGEE ANN POLYTECHNIC** **SCHOOL OF BUSINESS & ACCOUNTANCY** **CORPORATE REPORTING** **WORKSHOP: FRS 40 INVESTMENT PROPERTY; FRS 23 BORROWING COSTS; NOTE TO THE FINANCIAL STATEMENTS -- FIXED ASSETS** **[Question 1]** **Brighton Pte Ltd is a manufacturer and wholesaler of furniture. Indicate with a 'Y' if the following properties are investment properties and indicate with a 'N' if otherwise. Briefly explain your answer.** -- --------------------------------------------------------------------------- \(A) A piece of land owned by Brighton Pte Ltd and left vacant. The company is hoping to sell it when the market price is right. \(B) A factory owned and used by Brighton Pte Ltd for its manufacturing operations. \(C) A building owned by Brighton Pte Ltd and currently under construction. Upon completion, Brighton Pte Ltd intends to rent it to another party. \(D) Some condominium units owned by Brighton Pte Ltd currently occupied by its expatriate employees at a discounted rental rate. \(E) The warehouse owned and used by Brighton Pte Ltd for storing its goods. \(F) A piece of machine owned by Brighton Pte Ltd and rented to another business. \(G) A building that is currently owned by Brighton Pte Ltd and rented to a hotel business. \(H) A building owned by Brighton Pte Ltd and currently under construction. Upon completion, the building will be used as a showroom for the retailing of furniture manufactured by Brighton Pte Ltd. -- --------------------------------------------------------------------------- **[Question 2]** FFA Pte Ltd is engaged in the manufacture and sale of ink cartridges. Its financial year end falls on 31 December. On 1 January 20X1, the company acquired a completed building for \$2.5 million with cash. FFA will rent the building to Mova & Nova, a partnership business. FFA hopes to sell the building with the tenancy contract when its value has appreciated to a target level. Other items in relation to the building were as follows: Bank loan to finance the purchase \$1,500,000 ------------------------------------------------------------ ------------- **Annual interest on bank loan taken to buy the building** \$180,000 **Legal fees paid in relation to the building purchase** \$220,000 **Annual maintenance & repair costs of the building** \$16,000 For similar buildings accounted for as "property, plant and equipment", the company depreciates the building using the straight-line method over its estimated useful life of 25 years with no residual value. On 31 December 20X1 and 31 December 20X2, the building was valued at \$2.5 million and \$2.78 million respectively based on valuations done by BG Pte Ltd, an independent firm of valuers. On 1 June 20X3, the building was sold for cash proceeds of \$3.1 million. **Where assets are disposed of during the year, the depreciation charge for the year is pro-rated.** [Required: ] a. Identify the Singapore Financial Reporting Standard (FRS) which would apply in the above scenario in the recording of the building and explain why. b. **Calculate the total cost of the building to be capitalised as at 1 January 20X1. Justify your answer, by explaining for each of the above items, whether it should or should not be included in the cost of the building.** c. Using the subsequent measurement method in the FRS identified in (a) above, prepare the the necessary journal entries on 1 January 20X1, 31 December 20X1, 31 December 20X2 and 1 June 20X3 under the: i. cost model ii. fair value model **(c)** **(i) Cost Model** **(ii) Fair Value Model** ---------- -------------------- --------------------------- **Date** 1 Jan 20x1 31 Dec 20x1 31 Dec 20x2 1 Jun 20x3 **[Question 3] (adapted from Aug 2022 exam paper)** **The following is an extract of the statement of financial position of Hua Landscape Concepts Limited** ("HLC") **as at 31 Dec 20X8.** Its registered address is at 59 West Coast Way, Singapore 567890. **Hua Landscape Concepts Limited** ------------------------------------------------------------ ------------------------------------------ ----------- ----------- **Statement of Financial Position as at 31 December 20X8** **Note** **\$** **ASSETS** **Non-current assets** Fixed assets 3 4,936,300 Investment property 4 1,580,000 Investments 5 675,000 7,191,300 **Current assets** Inventories 350,000 Investments 5 250,000 Financial assets, at amortised cost: Trade receivables less allowance \$3,248 162,355 Cash & bank balances 535,000 1,297,355   **TOTAL ASSETS** 8,488,655 [Additional information]**:** i. The freehold land at West Coast Way was purchased in 20X6 and had been accounted for using the revaluation model. On December 20X8, the company engaged Wellington Realty, an independent valuer, to appraise the land. The fair value of the freehold land was then assessed to be \$4,530,000. The revaluation surplus of \$180,000 was credited directly to the asset revaluation reserve. ii. The company bought an industrial factory unit in 20X5 to earn rental income and for long-term capital appreciation. As at year-end, this factory unit was reflected in the accounts at its fair value of \$1,580,000. iii. On 1 July 20X8, HLC obtained a bank loan of \$1,290,000 which bears interest at 1.5% per annum from SUS Bank. The freehold land was pledged as a security for the loan. iv. The following fixed assets information is extracted from the company's trial balance as at 31 December 20X8: **Account** **Debit (\$)** **Credit (\$)** ------------------------------------------------ ---------------- ----------------- Building, at cost 425,000 Furniture & fittings 240,000 Office equipment 27,000 Accumulated depreciation: building 187,000 Accumulated depreciation: furniture & fittings 88,400 Accumulated depreciation: office equipment 10,300 During the year, there was disposal of office equipment costing \$20,000 for \$2,000. The Sales Office was renovated during the year - furniture (fully depreciated with a cost of \$26,000) were written off and replaced with new work stations, which were purchased for \$35,000. v. An extract of the income and expense items for the financial year ended 31 December 20X8 is as follows: +-----------------------------------+-----------------------------------+ | Depreciation expenses | | +-----------------------------------+-----------------------------------+ | - Building | | +-----------------------------------+-----------------------------------+ | - Furniture & fittings | 32,750 | +-----------------------------------+-----------------------------------+ | - Office equipment | 5,400 | +-----------------------------------+-----------------------------------+ | Directors' remuneration | 108,000 | +-----------------------------------+-----------------------------------+ | Loss on disposal of office | 4,000 | | equipment | | +-----------------------------------+-----------------------------------+ | Staff salaries | 365,250 | +-----------------------------------+-----------------------------------+ | Gain in fair value of industrial | 100,000 | | factory unit | | +-----------------------------------+-----------------------------------+ | Marketing expenses | 116,000 | +-----------------------------------+-----------------------------------+ | Inventory write-off | 4,800 | +-----------------------------------+-----------------------------------+ | Interest expense on bank | 3,900 | | overdraft | | +-----------------------------------+-----------------------------------+ | Income tax expense -- current | 72,000 | | year | | +-----------------------------------+-----------------------------------+ | Income tax expense -- | 9,830 | | over-provision of prior years' | | | tax | | +-----------------------------------+-----------------------------------+ | Utilities expense | 65,750 | +-----------------------------------+-----------------------------------+ **[Required:]** Prepare the Notes to the Financial Statements for: i. Note 3 - Fixed Assets; ii. Note 4 - Investment Property; that will form an integral part of the financial statements in a form suitable for presentation to the public. The presentations should, as far as information given in the question permits, comply with the minimum disclosure requirements of the Singapore Companies Act and FRS. **3. Fixed Assets** **(\$)** **(\$)** **(\$)** **(\$)** **Total (\$)** ------------------------------ ---------- ---------- ---------- ---------- ---------------- **Cost** Balance at 1 January 20X8 Revaluation surplus Additions Disposals Balance at 31 December 20X8 **Representing:** Independent valuation Cost **Accumulated Depreciation** Balance at 1 January 20X8 Depreciation for the year Disposals Balance at 31 December 20X8 **Net Book Value** Balance at 31 December 20X8 **4. Investment Property** **[\$]** --------------------------------------------------------- ---------------------- Fair value as at \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Adjustments to fair value Additions Disposals Fair value as at \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **The End**