- 20 Marks
FA – Nov 2019 – L2 – SB – Q6 – Accounting for Property, Plant, and Equipment (PPE)
This question deals with the accounting treatment for the disposal of property, plant, and equipment, including depreciation and profit/loss on disposal.
Question
a. The disposal of property, plant, and equipment (PPE) requires the determination of profit or loss on the asset and the subsequent de-recognition of affected assets.
Required:
State the double entries required to record the following events:
(7 Marks)
b. Davidsco Ventures Limited prepares its financial statements to December 31, each reporting year.
The company’s policy is to write off its plants at the rate of 10% per annum over a ten-year period.
During the year ended December 31, 2018, the company’s manufacturing plant register, in respect of three plants, is made available to you as follows:
| Plant | Acquisition Date | Amount (N’000) |
|---|---|---|
| Plant DV001 | July 01, 2016 | 1,200 |
| Plant DV002 | January 01, 2017 | 1,600 |
| Plant DV003 | October 01, 2018 | 900 |
The payments for the plants were made by cheque on the date of purchase.
The plant purchased in 2016 was sold on September 30, 2018 for N1,100,000.
The company charges depreciation on a time apportionment basis.
Required:
i. Prepare the plant account. (5 Marks)
ii. Prepare the provision for depreciation account. (5 Marks)
iii. Prepare the plant disposal account. (3 Marks)
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