Question Tag: Plant and Equipment

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  • 5 Marks

FR – Nov 2014 – L2 – Q7a – Property, Plant and Equipment (IAS 16)

Identify the elements of cost for PPE and provide examples of directly attributable costs.

a. IAS 16 covers all aspects of accounting for Property, Plant and Equipment (PPE), including its measurement and qualification for recognition as an asset. The standard also describes the elements of cost, stating that some costs are directly attributable to the costs of PPE while some other costs fail to qualify as costs of an item of PPE.

Required:

In the context of IAS 16, identify the elements of cost of an item of Property, Plant, and Equipment, giving SIX examples of directly attributable costs. (5 Marks)

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  • 15 Marks

FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

Skelewu Nigeria Limited owns the following Property, Plant and Equipment as at 31 December 2011.

 

Additional pieces of information are:

(i) Plant and Machinery are depreciated on a straight-line basis over 5 years. The plant & machinery was acquired on 1 January 2011.
(ii) Land is not depreciated.
(iii) Buildings are depreciated on a straight-line basis over 25 years.
(iv) Depreciation on office buildings is not deductible for tax purposes, but for the plant and machinery; tax deductible is granted over a period of 3 years in the ratio 50:30:20 percent of cost consecutively.
(v) The accounting profit before tax amounted to N15,000,000 for the 2012 financial year and N20,000,000 for the year 2013. These figures include non-taxable revenue of N4,000,000 in year 2012 and N5,000,000 in year 2013.
(vi) Skelewu Nigeria Limited had a tax loss on 31 December 2011 of N12,500,000. The tax rate for year 2011 was 35% and 30% for each of the years 2012 and 2013.

Required:

a. In accordance with IAS 12 on Income Taxes, differentiate between Current Tax and Deferred Tax. (2 Marks)

b. Prepare the Deferred Tax Account for the year ended 31 December 2013. (10 Marks)

c. Advise the Directors of Skelewu Nigeria Limited on the reasons why it is necessary to recognize or make provision for Deferred Tax in the company’s Financial Statements. (3 Marks)

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  • 15 Marks

FR – Nov 2015 – L2 – Q4b – Impairment of Assets (IAS 36)

Assess whether plant and equipment is impaired and explain how impairment loss should be treated in the books.

The following information relates to individual plant and equipment used by Phonex Nigeria Limited for its telecommunication operations as at December 31, 2014.

Plant and Equipment Carrying Amount (N’000) Fair Value less cost to sell (N’000) Value in use (N’000)
1. Mast 297,500 302,500 285,000
2. Generators 592,500 517,500 512,500
3. Computer equipment 287,500 292,500 307,500
4. Credit card machines 207,500 187,500 197,500
5. Motor vehicles 77,500 65,000 –

Additional information:

i. The Mast and the Generator are carried at revalued amounts, and the cumulative revaluation surplus in other comprehensive income for the equipment are N30,000,000 and N15,000,000, respectively.

ii. The motor vehicles are buses used for transporting employees in the morning and evening, and it is not possible to determine the value in use of the buses separately because the buses do not generate cash inflows from continuing use that are independent of the cash flows from other assets.

Required:
Draft a memo addressed to your boss indicating whether each of the plant and equipment is impaired or not and also explaining how the impairment loss should be treated in the books of Phonex Nigeria Limited as at December 31, 2014.

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  • 12 Marks

FR – Nov 2019 – L2 – Q1a – Property, Plant, and Equipment (IAS 16)

Explain the classification and measurement differences between investment properties and property, plant, and equipment.

You are the Financial Controller of Uchena Nigeria plc. The company was established about 15 years ago. At the last annual general meeting of the company, a new Managing Director was appointed.

The new Managing Director is a non-finance executive with very little knowledge of accounting. He has requested for the past five years financial statements of the company for review.

He has prepared a list of issues based on his review as follows:

  1. When I look at the statement of financial position of one of the past financial statements, one of the categories of non-current asset is investment properties and another category is property, plant, and equipment, in which all other properties are included. It is certain that the company invested in properties, so why do you have two categories for them in the statement of financial position? How did you decide what goes where?
  2. A note to the financial statements states that investment properties are measured at their fair values and not depreciated. Don’t all non-current assets have to be depreciated over their estimated useful lives?
  3. Another note to the financial statements states that property included in the property, plant, and equipment is measured at cost less accumulated depreciation rather than at fair value. Shouldn’t all properties be measured in financial statements on a consistent basis?
  4. Finally, I can’t see from the financial statements where gains or losses relating to the measurement of investment properties are included; the profit statement includes two main components: profit or loss and other comprehensive income; where would the gains or losses go? Presumably, the treatment of gains or losses is the same for any non-current assets, which one is measured at fair value?

Required:

Provide answers to the issues raised by the Managing Director. You should justify your answers with reference to the relevant IFRS. (12 Marks)

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  • 1 Marks

FA – Nov 2015 – L1 – SA – Q19 – Accounting for Property, Plant, and Equipment (IAS 16)

This question identifies which cost should not be included in the initial measurement of property, plant, and equipment.

Which of the following costs should NOT be included in the initial measurement of property, plant and equipment?
A. Purchase price
B. Site preparation cost
C. Professional fees
D. Installation cost
E. Site administration and general overhead costs

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  • 5 Marks

FA – Nov 2022 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

This question asks for five disclosures required under IAS 16 for property, plant, and equipment.

IAS 16 – Property, Plant and Equipment requires an entity to make certain disclosures in the financial statements for each major class of property, plant and equipment.

Required:
State FIVE of the disclosures under IAS 16. (5 Marks)

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  • 20 Marks

FA – May 2021 – L1 – SB – Q3 – Accounting for Property, Plant, and Equipment (IAS 16)

The question involves calculation of gain or loss on disposal of assets and disclosure of PPE movement under IAS 16.

Super Limited trades in farm feeds. The following information was extracted from its books as at 1 July 2018.

Description Amount (₦)
Property Cost 6,000,000
Plant and Machinery 2,419,000
Motor Vehicles 585,000
Accumulated Depreciation – Property 1,200,000
Accumulated Depreciation – Plant 687,000
Accumulated Depreciation – Motor Vehicles 210,000

During the year ended 30 June 2019, the following transactions took place:

(i) Additions to plant amounted to ₦231,000.

(ii) A plant that cost ₦415,500 with accumulated depreciation of ₦293,000 was sold for ₦129,000.

(iii) A new car was bought for ₦61,500, and a part-exchange allowance of ₦15,871 was received against an old car. The old car originally cost ₦55,548 and had accumulated depreciation of ₦39,536.

(iv) Depreciation is charged on PPE at the following rates:

  • Property: 2% p.a. straight line
  • Plant: 20% p.a. straight line
  • Motor Vehicles: 25% p.a. reducing balance

Required:

a) Calculate the gain or loss on the disposal of plant and the old car.
b) Show the disclosure (schedule of movement) under IAS 16 for the non-current assets for the year ended 30 June 2019.

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  • 6 Marks

FA – Nov 2023 – L1 – SB – Q4B – Accounting for Property, Plant, and Equipment (IAS 16)

Calculate the initial measurement of a motor vehicle for a business.

Caleb Limited has recently purchased a motor vehicle for its business operations. The company incurred various costs in acquiring, preparing, and operating the motor vehicle. The following information is available:

  1. Purchase price of motor vehicle – ₦5,000,000
  2. Annual insurance premium – ₦120,000
  3. Transportation costs to the company’s location – ₦50,000
  4. Installation costs for specialized equipment – ₦150,000
  5. License and registration fees – ₦80,000
  6. Fuel and maintenance expenses (for the first month of operation) – ₦70,000
  7. Legal fees for acquisition – ₦100,000

Required:
Calculate the initial measurement of the motor vehicle.

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  • 8 Marks

FA – Nov 2023 – L1 – SB – Q4A – Accounting for Property, Plant, and Equipment (IAS 16)

Describe and explain cost elements for PPE under IAS 16.

Provide a concise description of each cost element associated with Property, Plant, and Equipment (PPE) under IAS 16, and explain the conditions under which these costs are capitalized.

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  • 1 Marks

FA – Nov 2023 – L1 – SA – Q12 – Regulatory Environment of Accounting

Identify disclosure requirements for property, plant, and equipment under IAS 16.

In the notes to the financial statements, which of the following is NOT required to be disclosed regarding property, plant and equipment under IAS 16?

  • A. The fair value of the assets at the beginning and end of the period
  • B. The current market value of the assets at the end of the period
  • C. The gross carrying amounts and accumulated depreciation at the beginning and end of the period
  • D. The expected useful lives of the assets and their residual values
  • E. The total amount of additions made to the property, plant and equipment during the year

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  • 5 Marks

FR – Nov 2014 – L2 – Q7a – Property, Plant and Equipment (IAS 16)

Identify the elements of cost for PPE and provide examples of directly attributable costs.

a. IAS 16 covers all aspects of accounting for Property, Plant and Equipment (PPE), including its measurement and qualification for recognition as an asset. The standard also describes the elements of cost, stating that some costs are directly attributable to the costs of PPE while some other costs fail to qualify as costs of an item of PPE.

Required:

In the context of IAS 16, identify the elements of cost of an item of Property, Plant, and Equipment, giving SIX examples of directly attributable costs. (5 Marks)

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  • 15 Marks

FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

Skelewu Nigeria Limited owns the following Property, Plant and Equipment as at 31 December 2011.

 

Additional pieces of information are:

(i) Plant and Machinery are depreciated on a straight-line basis over 5 years. The plant & machinery was acquired on 1 January 2011.
(ii) Land is not depreciated.
(iii) Buildings are depreciated on a straight-line basis over 25 years.
(iv) Depreciation on office buildings is not deductible for tax purposes, but for the plant and machinery; tax deductible is granted over a period of 3 years in the ratio 50:30:20 percent of cost consecutively.
(v) The accounting profit before tax amounted to N15,000,000 for the 2012 financial year and N20,000,000 for the year 2013. These figures include non-taxable revenue of N4,000,000 in year 2012 and N5,000,000 in year 2013.
(vi) Skelewu Nigeria Limited had a tax loss on 31 December 2011 of N12,500,000. The tax rate for year 2011 was 35% and 30% for each of the years 2012 and 2013.

Required:

a. In accordance with IAS 12 on Income Taxes, differentiate between Current Tax and Deferred Tax. (2 Marks)

b. Prepare the Deferred Tax Account for the year ended 31 December 2013. (10 Marks)

c. Advise the Directors of Skelewu Nigeria Limited on the reasons why it is necessary to recognize or make provision for Deferred Tax in the company’s Financial Statements. (3 Marks)

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  • 15 Marks

FR – Nov 2015 – L2 – Q4b – Impairment of Assets (IAS 36)

Assess whether plant and equipment is impaired and explain how impairment loss should be treated in the books.

The following information relates to individual plant and equipment used by Phonex Nigeria Limited for its telecommunication operations as at December 31, 2014.

Plant and Equipment Carrying Amount (N’000) Fair Value less cost to sell (N’000) Value in use (N’000)
1. Mast 297,500 302,500 285,000
2. Generators 592,500 517,500 512,500
3. Computer equipment 287,500 292,500 307,500
4. Credit card machines 207,500 187,500 197,500
5. Motor vehicles 77,500 65,000 –

Additional information:

i. The Mast and the Generator are carried at revalued amounts, and the cumulative revaluation surplus in other comprehensive income for the equipment are N30,000,000 and N15,000,000, respectively.

ii. The motor vehicles are buses used for transporting employees in the morning and evening, and it is not possible to determine the value in use of the buses separately because the buses do not generate cash inflows from continuing use that are independent of the cash flows from other assets.

Required:
Draft a memo addressed to your boss indicating whether each of the plant and equipment is impaired or not and also explaining how the impairment loss should be treated in the books of Phonex Nigeria Limited as at December 31, 2014.

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  • 12 Marks

FR – Nov 2019 – L2 – Q1a – Property, Plant, and Equipment (IAS 16)

Explain the classification and measurement differences between investment properties and property, plant, and equipment.

You are the Financial Controller of Uchena Nigeria plc. The company was established about 15 years ago. At the last annual general meeting of the company, a new Managing Director was appointed.

The new Managing Director is a non-finance executive with very little knowledge of accounting. He has requested for the past five years financial statements of the company for review.

He has prepared a list of issues based on his review as follows:

  1. When I look at the statement of financial position of one of the past financial statements, one of the categories of non-current asset is investment properties and another category is property, plant, and equipment, in which all other properties are included. It is certain that the company invested in properties, so why do you have two categories for them in the statement of financial position? How did you decide what goes where?
  2. A note to the financial statements states that investment properties are measured at their fair values and not depreciated. Don’t all non-current assets have to be depreciated over their estimated useful lives?
  3. Another note to the financial statements states that property included in the property, plant, and equipment is measured at cost less accumulated depreciation rather than at fair value. Shouldn’t all properties be measured in financial statements on a consistent basis?
  4. Finally, I can’t see from the financial statements where gains or losses relating to the measurement of investment properties are included; the profit statement includes two main components: profit or loss and other comprehensive income; where would the gains or losses go? Presumably, the treatment of gains or losses is the same for any non-current assets, which one is measured at fair value?

Required:

Provide answers to the issues raised by the Managing Director. You should justify your answers with reference to the relevant IFRS. (12 Marks)

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  • 1 Marks

FA – Nov 2015 – L1 – SA – Q19 – Accounting for Property, Plant, and Equipment (IAS 16)

This question identifies which cost should not be included in the initial measurement of property, plant, and equipment.

Which of the following costs should NOT be included in the initial measurement of property, plant and equipment?
A. Purchase price
B. Site preparation cost
C. Professional fees
D. Installation cost
E. Site administration and general overhead costs

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  • 5 Marks

FA – Nov 2022 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

This question asks for five disclosures required under IAS 16 for property, plant, and equipment.

IAS 16 – Property, Plant and Equipment requires an entity to make certain disclosures in the financial statements for each major class of property, plant and equipment.

Required:
State FIVE of the disclosures under IAS 16. (5 Marks)

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  • 20 Marks

FA – May 2021 – L1 – SB – Q3 – Accounting for Property, Plant, and Equipment (IAS 16)

The question involves calculation of gain or loss on disposal of assets and disclosure of PPE movement under IAS 16.

Super Limited trades in farm feeds. The following information was extracted from its books as at 1 July 2018.

Description Amount (₦)
Property Cost 6,000,000
Plant and Machinery 2,419,000
Motor Vehicles 585,000
Accumulated Depreciation – Property 1,200,000
Accumulated Depreciation – Plant 687,000
Accumulated Depreciation – Motor Vehicles 210,000

During the year ended 30 June 2019, the following transactions took place:

(i) Additions to plant amounted to ₦231,000.

(ii) A plant that cost ₦415,500 with accumulated depreciation of ₦293,000 was sold for ₦129,000.

(iii) A new car was bought for ₦61,500, and a part-exchange allowance of ₦15,871 was received against an old car. The old car originally cost ₦55,548 and had accumulated depreciation of ₦39,536.

(iv) Depreciation is charged on PPE at the following rates:

  • Property: 2% p.a. straight line
  • Plant: 20% p.a. straight line
  • Motor Vehicles: 25% p.a. reducing balance

Required:

a) Calculate the gain or loss on the disposal of plant and the old car.
b) Show the disclosure (schedule of movement) under IAS 16 for the non-current assets for the year ended 30 June 2019.

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  • 6 Marks

FA – Nov 2023 – L1 – SB – Q4B – Accounting for Property, Plant, and Equipment (IAS 16)

Calculate the initial measurement of a motor vehicle for a business.

Caleb Limited has recently purchased a motor vehicle for its business operations. The company incurred various costs in acquiring, preparing, and operating the motor vehicle. The following information is available:

  1. Purchase price of motor vehicle – ₦5,000,000
  2. Annual insurance premium – ₦120,000
  3. Transportation costs to the company’s location – ₦50,000
  4. Installation costs for specialized equipment – ₦150,000
  5. License and registration fees – ₦80,000
  6. Fuel and maintenance expenses (for the first month of operation) – ₦70,000
  7. Legal fees for acquisition – ₦100,000

Required:
Calculate the initial measurement of the motor vehicle.

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  • 8 Marks

FA – Nov 2023 – L1 – SB – Q4A – Accounting for Property, Plant, and Equipment (IAS 16)

Describe and explain cost elements for PPE under IAS 16.

Provide a concise description of each cost element associated with Property, Plant, and Equipment (PPE) under IAS 16, and explain the conditions under which these costs are capitalized.

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  • 1 Marks

FA – Nov 2023 – L1 – SA – Q12 – Regulatory Environment of Accounting

Identify disclosure requirements for property, plant, and equipment under IAS 16.

In the notes to the financial statements, which of the following is NOT required to be disclosed regarding property, plant and equipment under IAS 16?

  • A. The fair value of the assets at the beginning and end of the period
  • B. The current market value of the assets at the end of the period
  • C. The gross carrying amounts and accumulated depreciation at the beginning and end of the period
  • D. The expected useful lives of the assets and their residual values
  • E. The total amount of additions made to the property, plant and equipment during the year

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