PPE – Page 2 – Knowsia

CR – May 2021 – L3 – Q1c – Property, Plant and Equipment (IAS 16)

Record journal entries for PPE acquisition and related foreign exchange adjustments in the books of Ngono Plc.

Question

c. Ngono Plc. has a financial year end of September 30. The Company buys property, plant and equipment for its office in Nigeria from foreign supplier Omaha Inc. in USA. On June 30, 2020, Ngono Plc. took delivery of PPE from Omaha Inc. with invoice value amounting to $100,000 and is due for settlement in equal instalments on August 30, 2020 and November 30, 2020. Clearing cost and import duty paid on the acquisition of the PPE amounted to N1,250,000. It is the policy of Ngono Plc to depreciate PPE at 20% on cost using the straight –line method. The depreciation is provided in full in the year of acquisition and none in the year of disposal.
Both Ngono Plc. and Omaha Inc. honoured their own part of the agreement in the transaction.
Movement recorded in the exchange rate were as follows:

Required:
Show the journal accounting entries to record the above transaction in the books of Ngono Plc. (10 Marks)

Answer

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Tags: Depreciation, Foreign Exchange, Journal Entries, PPE
Level: Level 3

Topic: 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.

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

FA – Nov 2020 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)

Determines the correct journal entry for the credit purchase of property, plant, and equipment (PPE).

Question

Which of the following journal entries correctly records the credit purchase of property, plant, and equipment (PPE)?

Account to be Debited	Account to be Credited
A. PPE register	Purchases ledger control
B. Purchase ledger control	PPE
C. Bank	PPE
D. PPE	Supplier of PPE
E. PPE	PPE disposal

Answer

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Tags: Credit Purchase, Journal Entries, PPE
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2020

FR – May 2019 – L2 – Q4a – Property, Plant, and Equipment (IAS 16)

Explanation of how initial costs of PPE should be measured and when subsequent expenditure should be capitalized under IAS 16.

Question

The objectives of IAS 16 are to prescribe the accounting treatment of property, plant, and equipment (PPE).

Required:
Explain how initial costs of property, plant, and equipment (PPE) should be measured and state the circumstances in which subsequent expenditure on non-current assets should be capitalized.

Answer

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Tags: Capitalization, IAS 16, Initial Measurement, PPE, Subsequent Expenditure
Level: Level 2

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

FA – May 2021 – L1 – SA – Q8 – Accounting for Property, Plant, and Equipment (IAS 16)

Calculate the initial cost of equipment including additional expenses.

Question

An entity purchased equipment for ₦20,000. The equipment was transported at ₦86, installation cost was ₦125, abnormal waste of materials was ₦15,000, and training cost of staff on the use of the machine was ₦255. How much should be recorded as the initial cost of the equipment?
A. ₦20,000
B. ₦20,086
C. ₦20,125
D. ₦20,211
E. ₦20,466

Answer

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Tags: Capitalization, Cost measurement, PPE
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2021

FA – May 2023 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Identifying the elements of the cost of Property, Plant, and Equipment (PPE) under IAS 16, with examples of directly attributable costs.

Question

In the context of IAS 16, identify the elements of the cost of an item of “Property, Plant, and Equipment,” giving FOUR examples of directly attributable costs. (8 Marks

Answer

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Tags: Cost Elements, Direct Costs, IAS 16, PPE
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2023

FA – Nov 2019 – L1 – SB – Q2c – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Classify expenditure for plant into capital and revenue.

Question

c. Ahmed Ventures Ltd acquired an item of plant from Judexco Machine Ltd to facilitate its operations.

The schedule of expenditure for the plant is given below:

Expenditure Item	N’000	%
Purchase price	480,000	100%
Trade discount applicable to the purchase price	8%
Early settlement discount on the payable amount	5%
Freight charges	25,000
Pre-production testing cost	15,000
One-year maintenance contract	12,000
Staff cost in relation to the use of the machine	8,000
Electrical installation cost	19,000
Concrete reinforcement	9,000
Cost of correcting installation error	17,000
Dismantling and restoration cost	20,000
Staff training in the use of the plant	14,000

Required:
Using the format provided below, classify the above plant costs into capital and revenue expenditure respectively. (14 Marks)

Answer

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Tags: Capital Expenditure, Classification, IAS 16, PPE, Revenue Expenditure
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2019

FA – Nov 2019 – L1 – SB – Q2a & b – Accounting for Property, Plant, and Equipment (IAS 16)-

Explanation of IAS 16 requirements for initial recognition of Property, Plant, and Equipment (PPE).

Question

a. Explain the requirements of IAS 16 on the initial recognition of Property, Plant, and Equipment (PPE).

(3 Marks)

b. After the acquisition of an item of PPE, an entity continues to incur subsequent expenditure on the item.

Required:
Explain briefly the requirements of IAS 16 in relation to subsequent expenditure and subsequent measurement. (3 Marks)

Answer

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Tags: Capital Expenditure, IAS 16, Initial Recognition, PPE
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2019

FA – May 2024 – L1 – SB – Q4a – Accounting for Property, Plant, and Equipment (IAS 16)

Describes how subsequent costs related to Property, Plant, and Equipment (PPE) are treated in accordance with IAS 16.

Question

Describes how subsequent costs related to Property, Plant, and Equipment (PPE) are treated in accordance with IAS 16.

Answer

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Tags: Asset Recognition, IAS 16, PPE, Subsequent Costs
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2024

FA – Mar/July 2020 – L1 – SA – Q16 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Accounting standard for recognizing newly constructed buildings

Question

Oladiya ventures is in the business of real estate and property management. In the current year, the business constructed several buildings which have been placed for sale.

Which of the following standards will be appropriate for the recognition of the newly constructed buildings?
A. IAS2 – Inventory
B. IAS16 – Property, Plant and Equipment
C. IAS40 – Investment Property
D. IAS37 – Provision, Contingent Liability and Contingent Asset
E. IFRS 15 – Revenue from Contract with Customers

Answer

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Tags: IAS16, IAS2, IAS40, Inventory, PPE
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAR/JULY 2020

FA – Mar/July 2020 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Identifying an example of capital expenditure

Question

Which of the following payments is an example of capital expenditure?
A. Refurbishment as part of upgrading a building
B. Carriage outwards in respect of goods sold
C. Legal fees incurred to recover customer debts
D. Bonuses to production operatives
E. Maintenance cost of building

Answer

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Tags: Building Upgrades, Capital Expenditure, PPE
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAR/JULY 2020

AA – Nov 2021 – L2 – Q2b – Audit and Assurance Evidence

Describes the substantive procedures auditors should adopt to verify valuation, completeness, and rights and obligations of property, plant, and equipment (PPE).

Question

Describe FOUR (4) substantive procedures the external auditor of HMH should adopt to verify each of the following assertions in relation to an entity’s property, plant and equipment (PPE):

i) Valuation
ii) Completeness
iii) Rights and obligations

(Note: Assume that the hospital prepares Financial Statements in accordance with International Financial Reporting Standards)

Answer

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Tags: Completeness, PPE, Rights and Obligations, Substantive Procedures, Valuation
Level: Level 2

Topic: Audit and Assurance Evidence
Series: NOV 2021

Question Tag: PPE

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CR – May 2021 – L3 – Q1c – Property, Plant and Equipment (IAS 16)

Record journal entries for PPE acquisition and related foreign exchange adjustments in the books of Ngono Plc.

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

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

FA – Nov 2020 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)

Determines the correct journal entry for the credit purchase of property, plant, and equipment (PPE).

FR – May 2019 – L2 – Q4a – Property, Plant, and Equipment (IAS 16)

Explanation of how initial costs of PPE should be measured and when subsequent expenditure should be capitalized under IAS 16.

FA – May 2021 – L1 – SA – Q8 – Accounting for Property, Plant, and Equipment (IAS 16)

Calculate the initial cost of equipment including additional expenses.

FA – May 2023 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Identifying the elements of the cost of Property, Plant, and Equipment (PPE) under IAS 16, with examples of directly attributable costs.

FA – Nov 2019 – L1 – SB – Q2c – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Classify expenditure for plant into capital and revenue.

FA – Nov 2019 – L1 – SB – Q2a & b – Accounting for Property, Plant, and Equipment (IAS 16)-

Explanation of IAS 16 requirements for initial recognition of Property, Plant, and Equipment (PPE).

FA – May 2024 – L1 – SB – Q4a – Accounting for Property, Plant, and Equipment (IAS 16)

Describes how subsequent costs related to Property, Plant, and Equipment (PPE) are treated in accordance with IAS 16.

FA – Mar/July 2020 – L1 – SA – Q16 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Accounting standard for recognizing newly constructed buildings

FA – Mar/July 2020 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Identifying an example of capital expenditure

AA – Nov 2021 – L2 – Q2b – Audit and Assurance Evidence

Describes the substantive procedures auditors should adopt to verify valuation, completeness, and rights and obligations of property, plant, and equipment (PPE).

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CR – May 2021 – L3 – Q1c – Property, Plant and Equipment (IAS 16)

Record journal entries for PPE acquisition and related foreign exchange adjustments in the books of Ngono Plc.

You're reporting an error for "CR – May 2021 – L3 – Q1c – 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"

FA – Nov 2020 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)

Determines the correct journal entry for the credit purchase of property, plant, and equipment (PPE).

You're reporting an error for "FA – Nov 2020 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)"

FR – May 2019 – L2 – Q4a – Property, Plant, and Equipment (IAS 16)

Explanation of how initial costs of PPE should be measured and when subsequent expenditure should be capitalized under IAS 16.

You're reporting an error for "FR – May 2019 – L2 – Q4a – Property, Plant, and Equipment (IAS 16)"

FA – May 2021 – L1 – SA – Q8 – Accounting for Property, Plant, and Equipment (IAS 16)

Calculate the initial cost of equipment including additional expenses.

You're reporting an error for "FA – May 2021 – L1 – SA – Q8 – Accounting for Property, Plant, and Equipment (IAS 16)"

FA – May 2023 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Identifying the elements of the cost of Property, Plant, and Equipment (PPE) under IAS 16, with examples of directly attributable costs.

You're reporting an error for "FA – May 2023 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16"

FA – Nov 2019 – L1 – SB – Q2c – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Classify expenditure for plant into capital and revenue.

You're reporting an error for "FA – Nov 2019 – L1 – SB – Q2c – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16"

FA – Nov 2019 – L1 – SB – Q2a & b – Accounting for Property, Plant, and Equipment (IAS 16)-

Explanation of IAS 16 requirements for initial recognition of Property, Plant, and Equipment (PPE).

You're reporting an error for "FA – Nov 2019 – L1 – SB – Q2a & b – Accounting for Property, Plant, and Equipment (IAS 16)-"

FA – May 2024 – L1 – SB – Q4a – Accounting for Property, Plant, and Equipment (IAS 16)

Describes how subsequent costs related to Property, Plant, and Equipment (PPE) are treated in accordance with IAS 16.

You're reporting an error for "FA – May 2024 – L1 – SB – Q4a – Accounting for Property, Plant, and Equipment (IAS 16)"

FA – Mar/July 2020 – L1 – SA – Q16 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Accounting standard for recognizing newly constructed buildings

You're reporting an error for "FA – Mar/July 2020 – L1 – SA – Q16 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS"

FA – Mar/July 2020 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Identifying an example of capital expenditure

You're reporting an error for "FA – Mar/July 2020 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS"

AA – Nov 2021 – L2 – Q2b – Audit and Assurance Evidence

Describes the substantive procedures auditors should adopt to verify valuation, completeness, and rights and obligations of property, plant, and equipment (PPE).

You're reporting an error for "AA – Nov 2021 – L2 – Q2b – Audit and Assurance Evidence"

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