QUESTION 1 (25 marks) Mayland Bhd is a company that provides apparel for bicyles and motorbikes activities. This include

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Question 1 25 Marks Mayland Bhd Is A Company That Provides Apparel For Bicyles And Motorbikes Activities This Include 1 (105.82 KiB) Viewed 30 times

QUESTION 1 (25 marks) Mayland Bhd is a company that provides apparel for bicyles and motorbikes activities. This includes safety riding jackets, gloves, riding plants and boots. Maylan Bhd started their business in Year 2000 after acquiring a leasehold land in Shah Alam and building a plant to manufacture this line of clothing. The plant has been identified as a cash generating unit (CGU) to Mayland Bhd. All the relevant assets of the plant, such as the offices, canteen, factory, machiery and equipment are depreciated constantly over time. The intial cost is RM 20 million, with 10 years of lease period. At the end of 2020, it is found that the carying amount of the assets that are included in the CGU is RM 12,000,000. Mayland Bhd's directors have decided to expand and restructure the whole plant with ZAM Contractors at an estimated cost of RM5,000,000 the year after. Mayland Bhd is expected to benefit significantly from this expansion project. It is calculated that the cost of capital is to be estimated at 11%. When testing for impairment, it is found that the fair value of the plant is RM 9,000,000. The following future net cash inflows have been calculated by the analyst, conveying two different scenarios (1) with, and (2) without, the expansion project. Year Discount Factor at 11%* 1 0.9009 2 0.8116 3 0.7312 4 0.6587 5 0.5935 *Present Value of Single Payment Without Expansion (RM'000) 2.500 2.700 2.900 3.000 3,200 With Expansion (RM²000) 2,500 2.800 3,000 3.300 3,500 Required: a) Explain what will be the relevant impairment test to be performed for the Year 2020. Impairment test if conducted without considering the implications from the planned restructuring because the company has not committed into the restructuring plan yet. Therefore, the following is calculated (without restructuring): (10 marks) b) Assuming that Mayland Bhd will implement the restructuring plan by the end of Year 2021, how would this information affect the impairment test? (15 marks