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CR SOLUTIONS TO IAS 16 QUESTIONS

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Taiwo
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17 views

CR SOLUTIONS TO IAS 16 QUESTIONS

Uploaded by

Taiwo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SOLUTION To Q1

Computation of the cost of Machine


#
List price of the machine 1,000,000
Less Trade discount given (50,000)
Delivery cost 100,000
Installation cost 125,000
Cost of site preparation 200,000
Architect’s fees 15,000
Test run cost (75,000 – 10,000) 65,000
clearance cost 250,000
TOTAL COST OF MACHINE 1,705,000
SOLUTION To Q4

Calculation of annual depreciation charges:

NB: Each components of the asset will be depreciated based on their respective useful life.

Calculation of annual depreciation charge $'000

Land (not depreciable) nil


Roof [$2.4 nillion÷30 years] 80
Lift [$3 million÷20 years] 150
Fixtures [S2 million ÷10 years] 200
Remainder of building [$4 million÷ 40 years] 100
Annual depreciation charge on the asset 530

ACCOUNTING ENTRIES

Dr Depreciation expense (cost of sales or administrative expenses) $530,000

Cr Accumulated depreciation $530,000

SOLUTION To Q5

MET ltd
1. computation of the cost of factory #'000
purchase of land 10,000.00
cost of dismantling existing structures 500.00
purchase of materials 6,000.00
employee's benefit cost (8/9*1,800) 1,600.00
Direct Production overhead cost (1,200 - 200) 1,000.00
General admin overhead (not to be capitalized) -
Professional fee(Architects fees) 400.00
cost of relocating staff to new factory) (not to be capitalized) -
cost of opening new factory (not to be capitalized) -
Loan interest (10% * 1,200 * 8/12) 80.00
Present Value of future restoration cost (0.215 * 2) 430.00
Cost of the factory 20,010.00

2. computation subsequent amount of the factory #'000


cost - accumulated depreciation less accumulated impairment loss (if any)
depreciation = cost - residual value / useful life =(20,010 - 0 / 20yrs * 4/12) 333.50

carrying value = 20,010 – 333.50 19,676.50


3. Draft financial statement as at 30 september 20X7 #'000
income statement Expenses
Depreciation 333.50
general admin overhead 600.00
abnormal cost of production overhead 200.00
Employee's cost (1 mths) (1/9*1,800) 200.00
cost of relocating staff 300.00
cost of factory opening 200.00
Loan interest (1,200 - 802) 1,120.00
unwinding cost (8% * 430) 34.40
2,987.90

Financial Position #'000


NCA
PPE (factory) 19,676.50

Liability
Provision (PV of future restoration cost) 430.00
Unwinding cost 34.40

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