Semenyih and Puchong

QUESTION 1Two pieces of land in Semenyih and Puchong and also an eight-storey office building have beenacquired by Nayland Bhd on 1 July 2017, The cost of Semenyih land, Puchong land and officebuilding are RM3,500,000, RM4,000,000 and RM5,000,000, respectively. Puchong land wasacquired to construct Nayland’s warehouse while the office building was rented out to itssubsidiary company, Mayland Bhd at market rental rates. However, the management of NaylandBhd has not decided whether to use Semenyih land for expansion or sell it later when the pricegoes up. It is estimated that the office building will evenly provide benefits to the company overits useful life of 40 years. Nayland Bhd uses a revaluation model for plant, property and equipment(PPE) and fair value model for its investment property. Nayland Bhd’s accounting year ends on31 December each year. A professional appraiser has assessed the propertie’s market value for theyear end 2017 and 2018, as follows:PropertyFair Value 2017Fair Value 2018(RM)(RM)Semenyih landRoilon3,300,000ist to2,500,000Puchong land4,000,0004,050,000Eight-storey office building5,500,0005,200,000On 1 March 2019, Nayland Bhd occupied back the office building as their main office forcompany’s operation. However, the building also partially rented out. The floor area rented outwas just a small portion of the overall office-building and its value could not be separatelyidentified. The fair value of an office building at the commencement date of occupied wasRM5,400,000.REQUIRED:(a)Explain which property(ies) can be classified as investment property for Nayland Bhdaccording to MFRS 140 Investment Property.(b)Prepare the related journal entries for Nayland Bhd’s investment property(ies) for the years2017, 2018 and 2019.(c)Nayland’s office building was rented to its subsidiary, Mayland Bhd. Based on the MFRS140 Investment Property, advice on the accounting treatment to record this officebuilding in company’s and group financial statement.