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On 1 June 2019, Pamelo Bhd with a financial year end of 31 May, acquired a property for RM5 million and charges depreciation at 10% per annum based on reducing balance method. At 31 May 2021, an impairment loss of RM200,000 was recognized, which resulted in the property being valued at its estimated value in use.
On 1 September 2021, as a consequence of a proposed move to new premises, the property was classified as held for sale. At the time of classification as held for sale, the fair value less costs to sell was RM3.4 million. The property was sold on 10 June 2022 for RM4 million.
Required:
(a) Calculate the new carrying amount of the property as at 31 May 2021.
(b) Appraise the accounting treatment for the above property to be classified as held for sale (HFS) and accounting treatment on its subsequent disposal, including the gain or loss on disposal, in the financial statement of Pamelo Bhd.
Support your explanation with relevant computations.
[Note: Criteria to fulfil to classify the property as HFS is not required.]Hi,
I can see that you’ve posted a full question but I’m not here to answer full questions for students, sorry. If you could please attempt the question and then let me know where you are struggling and can’t get the answer then I’ll gladly help.
To get you started, you need to calculate the carrying value of the asset immediately prior to reclassification as HFS so that you can compare it to the FV less costs to sell.
Thanks
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