IAS 16 PPE

What are the recognition criteria for IAS 16 PPE?

• Cost can be measured reliably

• It is probable that there will be an outflow of economic benefits

• Future economic benefits will flow to the entity

• There is a present obligation due to past events

IAS 16 PPE can be measured using which method?

• Cost model

• Fair value model

• Revaluation model

• Replacement cost

Tibet acquired a new office building on 1 October 20X4. Its initial carrying amount consisted of (refer photo).

The estimated lives of the building structure and air conditioning system are 25 years and 10 years respectively.

When the air conditioning system is due for replacement, it is estimated that the old system will be dismantled and sold for $500,000.

Depreciation is time‐apportioned where appropriate.

At what amount will the office building be shown in Tibet’s statement of financial position as at 31 March 20X5?

(Answer in full)

The following trial balance extract relates to a property which is owned by Veeton as at 1 April 20X4 (refer photo).

On 1 October 20X4, following a sustained increase in property prices, Veeton revalued its property to $10.8 million.

What will be the depreciation charge in Veeton’s statement of profit or loss for the year ended 31 March 20X5?

(Answer in full)

Foster Co has built a new factory incurring the following costs (Refer photo)

What will be the total amount capitalised in respect of the factory?

• $6,640,000

• $6,950,000

• $7,112,000

• $7,100,000

Wetherby Co purchased a machine on 1 July 20X7 for $500,000. It is being depreciated on a straight-line basis over its useful life of ten years. Residual value is estimated at $20,000. On 1 January 20X8, following a change in legislation, Wetherby Co fitted a safety guard to the machine. The safety guard cost $25,000 and has a useful life of five years with no residual value.

What amount will be charged to profit or loss for the year ended 31 March 20X8 in respect of depreciation on this machine?

Auckland Co purchased a machine for $60,000 on 1 January 20X7 and assigned it a useful life of 15 years. On 31 March 20X9 it was revalued to $64,000 with no change in useful life.

What will be depreciation charge in relation to this machine in the financial statements of Auckland Co for the year ending 31 December 20X9?

An entity purchased property for $6 million on 1 July 20X3.

The value of the land was $1 million and the building $5 million.

The expected life of the building was 50 years and its residual value nil.

On 30 June 20X5 the property was revalued to $7 million (land $1.24 million, buildings $5.76 million).

On 30 June 20X7, the property was sold for $6.8 million.

 

State whether entity made a gain or loss on disposal of the property. What amount would be reported in the statement of profit or loss for the year to 30 June 20X7?

• GAIN

• LOSS

• $40,000

• $200,000

On 1 July 20X4, Experimenter opened a chemical reprocessing plant.

The plant was due to be active for five years until 30 June 20X9, when it would be decommissioned.

At 1 July 20X4, the costs of decommissioning the plant were estimated to be $ 4 million in 5 years time.

The company considers that a discount rate of 12% is appropriate for the calculation of a present value, and the discount factor at 12% for Year 5 is 0.567.

 

What is the total charge to the statement of profit or loss (depreciation and finance charge) in respect of decommissioning for the year ended 30 June 20X5?

Lydd purchased production machinery costing $100,000, having an estimated useful life of twenty years and a residual value of $2,000.

After being use for six years the remaining useful life of the machinery is revised an estimated to be twenty-five years, with an unchanged residual value.

 

What is the annual depreciation charge on the machinery in year 7?