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    Tutorial QS IAS 16 Property, Plant and Equipment (PPE)

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    Puneet
    This document contains 4 questions regarding accounting for property, plant, and equipment (PPE) in accordance with IAS 16. Question 1 asks about the purposes of depreciation and when the reducing balance method is more appropriate than the straight-line method. Question 2 provides a case study and asks to prepare machinery, accumulated depreciation, and disposal accounts. Question 3 asks to calculate depreciation under different methods for a lorry over 5 years. Question 4 asks to calculate amounts for an asset revalued on January 1, 2019 that was originally purchased on January 1, 2016.

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    Tutorial QS IAS 16 Property, Plant and Equipment (PPE)

    Uploaded by

    Puneet
    68 views2 pages
    This document contains 4 questions regarding accounting for property, plant, and equipment (PPE) in accordance with IAS 16. Question 1 asks about the purposes of depreciation and when the reducing balance method is more appropriate than the straight-line method. Question 2 provides a case study and asks to prepare machinery, accumulated depreciation, and disposal accounts. Question 3 asks to calculate depreciation under different methods for a lorry over 5 years. Question 4 asks to calculate amounts for an asset revalued on January 1, 2019 that was originally purchased on January 1, 2016.

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    This document contains 4 questions regarding accounting for property, plant, and equipment (PPE) in accordance with IAS 16. Question 1 asks about the purposes of depreciation and when the reducing balance method is more appropriate than the straight-line method. Question 2 provides a case study and asks to prepare machinery, accumulated depreciation, and disposal accounts. Question 3 asks to calculate depreciation under different methods for a lorry over 5 years. Question 4 asks to calculate amounts for an asset revalued on January 1, 2019 that was originally purchased on January 1, 2016.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    68 views2 pages

    Tutorial QS IAS 16 Property, Plant and Equipment (PPE)

    Uploaded by

    Puneet
    This document contains 4 questions regarding accounting for property, plant, and equipment (PPE) in accordance with IAS 16. Question 1 asks about the purposes of depreciation and when the reducing balance method is more appropriate than the straight-line method. Question 2 provides a case study and asks to prepare machinery, accumulated depreciation, and disposal accounts. Question 3 asks to calculate depreciation under different methods for a lorry over 5 years. Question 4 asks to calculate amounts for an asset revalued on January 1, 2019 that was originally purchased on January 1, 2016.

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    AQ054-3-2 Advanced Financial Accounting

    IAS 16 Property, Plant and Equipment (PPE)

    Question 1
    a) What are the purposes of providing for depreciation?

    b) In what circumstances is the reducing balance method more appropriate than the
    straight-line method? Give reasons for your answer.

    Question 2
    A business purchased two rivet-making machines on 1 January 20X5 at a cost of $15,000
    each. Each had an estimated life of five years and a nil residual value. The straight line
    method of depreciation is used. Owing to an unforeseen slump in market demand for rivets,
    the business decided to reduce its output of rivets, and switch to making other products
    instead. On 31 March 20X7, one rivet-making machine was sold (on credit) to a buyer for
    $8,000. Later in the year, however, it was decided to abandon production of rivets altogether,
    and the second machine was sold on 1 December 20X7 for $2,500 cash.
    Required:
    Prepare the machinery account, accumulated depreciation of machinery account and disposal
    of machinery account for the accounting year to 31 December 20X7.

    Question 3
    A lorry bought for a business cost $17,000. It is expected to last for five years and then be
    sold for scrap for $2,000. Usage over the five years is expected to be:
    Year 1 200 days
    Year 2 100 days
    Year 3 100 days
    Year 4 150 days
    Year 5 40 days
    Required:
    Work out the depreciation to be charged each year under:
    (a) The straight line method
    (b) The reducing balance method (using a rate of 35%)
    (c) The machine hour method
    (d) The sum-of-the digits method

    1
    AQ054-3-2 Advanced Financial Accounting

    Question 4
    Pacific bought an item of property, plant and equipment for $80 million on 1 January 2016.
    The asset had zero residual value and was to be depreciated over its estimated useful life of
    20 years.
    On 1 January 2019 the asset was revalued to its fair value of $95 million.

    Calculate the amounts to shown in the financial statements of Pacific for the year-ended
    31 December 2019.

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