Leasehold Property – NBC Institute

FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements

Classify expenditure as capital or revenue and state recognition in financial statements.

Question

Given below are items of revenue and capital expenditure:

A number of new cars recently cleared by a motor car dealing company.
Two new motor boats acquired by a ferry service agency.
Vacant houses owned by an estate developing company, for which negotiations are ongoing for sale to prospective landlords.
New buildings acquired for the purpose of holding items of plant and machinery belonging to a detergent manufacturing company.
Cost of acquiring a leasehold property for office use.
Granites purchased by an engineering contractor for use at a construction site.
Cost of rehabilitating a dilapidated housing unit owned by an estate developer.
Pre-production testing cost.

Required:

a. Using the tabular format below, classify the above transactions into capital or revenue expenditure. (8 Marks)

S/N | Capital Expenditure | Revenue Expenditure

b. State whether each of the items above will be recognized in the statement of profit or loss or in the statement of financial position. (8 Marks)

c. In respect of the information in (a) above, outline the details of information of the capital expenditure that should be included in the property, plant, and equipment (PPE) register. (4 Marks)

Answer

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Tags: Capital Expenditure, Depreciation, Financial Statements, Leasehold Property, PPE, Revenue Expenditure
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2020

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

Question

Chidinma Ventures Plc. acquired a 12-year lease on a property on 1 October, 2016 at a cost of N132 million. The company’s policy is to revalue its properties to their market value at the end of each year.

Accumulated amortization is eliminated, and the property is restated to the revalued amount. Annual amortization is calculated on the carrying values at the beginning of the year. The market values of the property on 30 September 2017 and 2018 were N127.05 million and N96.25 million, respectively. The existing balance on the revaluation surplus at 1 October, 2016 was N27.5 million. This is related to some non-depreciable land whose value had not changed significantly since 1 October 2016.

Required:
Prepare extracts of the statement of profit or loss and statement of financial position for the year ended 30 September 2017 and 2018 in respect of the leasehold property.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Amortization, IAS 16, Leasehold Property, Revaluation, Revaluation Loss, Revaluation Surplus
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements

Classify expenditure as capital or revenue and state recognition in financial statements.

Question

Given below are items of revenue and capital expenditure:

A number of new cars recently cleared by a motor car dealing company.
Two new motor boats acquired by a ferry service agency.
Vacant houses owned by an estate developing company, for which negotiations are ongoing for sale to prospective landlords.
New buildings acquired for the purpose of holding items of plant and machinery belonging to a detergent manufacturing company.
Cost of acquiring a leasehold property for office use.
Granites purchased by an engineering contractor for use at a construction site.
Cost of rehabilitating a dilapidated housing unit owned by an estate developer.
Pre-production testing cost.

Required:

a. Using the tabular format below, classify the above transactions into capital or revenue expenditure. (8 Marks)

S/N | Capital Expenditure | Revenue Expenditure

b. State whether each of the items above will be recognized in the statement of profit or loss or in the statement of financial position. (8 Marks)

c. In respect of the information in (a) above, outline the details of information of the capital expenditure that should be included in the property, plant, and equipment (PPE) register. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Expenditure, Depreciation, Financial Statements, Leasehold Property, PPE, Revenue Expenditure
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2020

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

Question

Required:
Prepare extracts of the statement of profit or loss and statement of financial position for the year ended 30 September 2017 and 2018 in respect of the leasehold property.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Amortization, IAS 16, Leasehold Property, Revaluation, Revaluation Loss, Revaluation Surplus
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

Question Tag: Leasehold Property

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FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements

Classify expenditure as capital or revenue and state recognition in financial statements.

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements

Classify expenditure as capital or revenue and state recognition in financial statements.

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

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FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements

Classify expenditure as capital or revenue and state recognition in financial statements.

You're reporting an error for "FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements"

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

You're reporting an error for "FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)"

FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements

Classify expenditure as capital or revenue and state recognition in financial statements.

You're reporting an error for "FA – Nov 2020 – L1 – SB – Q5 – Elements of Financial Statements"

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

You're reporting an error for "FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)"

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