Property, Plant and Equipment (PPE)

IAS16
Objective tests 1 - 5
 Objective test 1
EN Entity, a VAT vendor, produces ceramic products. On 1 April 2014, EN Entity ordered
a new molding machine from FA Entity, also a VAT vendor, for R205 200. The machine
was delivered on 30 April 2014 and assembled at a cost of R11 400. The machine was
successfully tested on 30 May 2014. The tests cost R12 500 in employee time and R9
000 excl. VAT in materials from its existing inventory. The test products were sold for R5
700. Training of staff cost R7 980. The machine was brought into use on 30 June 2014.
Depreciation is calculated on a straight line basis over 5 years with a residual value of
R20 000.
Required:
Calculate the depreciation for the year ended 31 December 2014.

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 Objective test 2
The following records appear on the books of EN Entity for the period ended 31
December 2015:

Dr Cr
Equipment 800 000
Accumulated depreciation: Equipment 320 000

The policy of EN Entity was to depreciate on a straight line basis at 10% per annum
with no residual value.
On 31 December 2016, the remaining useful life was revised to 4 years with a
residual value of R75 000.
Required:
Calculate the depreciation for the year ended 31 December 2016.
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 Objective test 3
The following records appear on the books of EN Entity for the period ended 31
December 2015:
Dr Cr
Equipment 800 000
Accumulated depreciation: Equipment 320 000

The policy of EN Entity was to depreciate on a straight line basis at 10% per
annum with no residual value.
On 31 December 2016, it was decided to use the diminishing balance method at a
rate of 27% with a residual value of R75 000 and a remaining useful life of 5 years.
Required:
Calculate the depreciation for the year ended 31 December 2016.

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 Objective test 4
The policy of the EN Entity is to depreciate vehicles on the units of
production method based on KMs travelled with a residual value of
10% of the cost. Vehicles are expected to travel a total of 150 000km
over their useful lives.

On 01 September 2016, EN Entity purchased a delivery vehicle for

R285 000. For the 3 months period up to 31 December 2016, the
vehicle travelled 12 000km.

Required:
Calculate the depreciation for the vehicle for the year ended 31
December 2016.
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 Objective test 5
The policy of the EN Entity is to depreciate vehicles on straight
line basis at 20% per annum with a residual value of 10% of the
cost.

On 01 September 2016, EN Entity purchased a delivery vehicle

for R285 000.

Required:
Calculate the depreciation on the vehicle for the year ended 31
December 2016.

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OBJECTIVE TEST SOLUTIONS

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 Objective test 1
EN Entity, a VAT vendor, produces ceramic products. On 1 April 2014, EN Entity ordered
a new molding machine from FA Entity, also a VAT vendor, for R205 200. The machine
was delivered on 30 April 2014 and assembled at a cost of R11 400. The machine was
successfully tested on 30 May 2014. The tests cost R12 500 in employee time and R9
000 excl. VAT in materials from its existing inventory. The test products were sold for R5
700. Training of staff cost R7 980. The machine was brought into use on 30 June 2014.
Depreciation is calculated on a straight line basis over 5 years with a residual value of
R20 000.
Required:
Calculate the depreciation for the year ended 31 December 2014.

9
 Objective test 1
Cost:
Purchase price (205 200*100/114) 180 000
Assembly costs (11 400*100/114) 10 000
Testing costs (12 500+9 000) 21 500
Proceeds from test products (5 700*100/114) (5 000)
Staff training -
Total cost 206 500

Residual value (20 000)

Depreciable amount 186 500

Depreciation from 30 May 2014 21 758

(186 500/5*7/12)

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 Objective test 2
The following records appear on the books of EN Entity for the period ended 31
December 2015:

Dr Cr
Equipment 800 000
Accumulated depreciation: Equipment 320 000

The policy of EN Entity was to depreciate on a straight line basis at 10% per annum
with no residual value.
On 31 December 2016, the remaining useful life was revised to 4 years with a
residual value of R75 000.
Required:
Calculate the depreciation for the year ended 31 December 2016.
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 Objective test 2
Cost 800 000
Accumulated depreciation (320 000)
Carrying amount (1 Jan. 2016) 480 000

Remaining useful life on 31 Dec. 2016 4 years

Remaining useful life on 1 Jan. 2016 5 years

Therefore depreciation (480 000 – 75 000)/5 years 81 000

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 Objective test 3
The following records appear on the books of EN Entity for the period ended 31
December 2015:
Dr Cr
Equipment 800 000
Accumulated depreciation: Equipment 320 000

The policy of EN Entity was to depreciate on a straight line basis at 10% per
annum with no residual value.
On 31 December 2016, it was decided to use the diminishing balance method at a
rate of 27% with a residual value of R75 000 and a remaining useful life of 5 years.
Required:
Calculate the depreciation for the year ended 31 December 2016.

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 Objective test 3
Cost 800 000
Accumulated depreciation (320 000)
Carrying amount (1 Jan. 2016) 480 000

Depreciation (480 000 * 27%) 129 600

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 Objective test 4
The policy of the EN Entity is to depreciate vehicles on the units of production method
based on KMs travelled with a residual value of 10% of the cost. Vehicles are
expected to travel a total of 150 000km over their useful lives.

On 01 September 2016, EN Entity purchased a delivery vehicle for R285 000. For the
4 months period up to 31 December 2016, the vehicle travelled 12 000km.

Required:
Calculate the depreciation for the vehicle for the year ended 31 December 2016.

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 Objective test 4
Is supplier a registered VAT vendors? Assuming that the supplier
is a registered VAT vendor:

Cost (285 000*100/114) 250 000

Depreciation ((250 000 – 25 000) * 12 000/150 000) 18 000

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 Objective test 5
The policy of the EN Entity is to depreciate vehicles on straight line basis at 20% per
annum with a residual value of 10% of the cost.

On 01 September 2016, EN Entity purchased a delivery vehicle for R285 000.

Required:
Calculate the depreciation for the vehicle for the year ended 31 December 2016.

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 Objective test 5
Is supplier a registered VAT vendors? Assuming that the supplier
is a registered VAT vendor:

Cost (285 000*100/114) 250 000

Depreciation ((250 000 – 25 000) * 20% * 4/12) 15 000

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