- 25 Marks
FR – L2 – Q21 – Property, Plant, and Equipment
Calculate machinery costs, premises costs, depreciation, disposal loss, and revaluation reserve for various transactions.
Question
21 SUNDRY QUESTIONS
1 A company purchased some heavy machinery. The invoice for the machinery showed the following items:
| GH₵000 | |
|---|---|
| Cost of machinery | 46,000 |
| Cost of delivery | 900 |
| Cost of 12-month warranty on the machinery | 1,600 |
| Total amount payable | 48,500 |
In addition, the company incurred GH₵3.4 million in making modifications to its factory so that the heavy machinery could be installed.
What should be the cost of the machinery in the company’s machinery account in the ledger?
2 A business acquired new premises at a cost of GH₵400 million on 1 January 20X5. In the period to the year end of 31 March 20X5 the following further costs were incurred.
| GH₵000 | |
|---|---|
| Costs of initial adaptation of the building | 12,000 |
| Legal costs relating to the purchase | 2,500 |
| Monthly cleaning contract | 3,400 |
| Cost of air conditioning unit necessary for machinery to be used | 2,800 |
| Cost of machinery | 12,300 |
What amount should appear as the cost of premises in the company’s statement of financial position at 31 March 20X5?
3 The plant and machinery account for a company for the year ended 30 June 20X5 is as follows.
Plant and machinery account
| 20X4 | GH₵000 | GH₵000 | ||
|---|---|---|---|---|
| 1 July | Balance | 960,000 | 31 March | Transfer to disposal account |
| 31 Dec | Cash: purchase of machines | 200,000 | 30 June | Balance |
| 1,160,000 |
The company’s policy is to charge depreciation on plant and machinery at 25% each year on the straight-line basis, with proportionate charges in the year of acquisition and the year of disposal. None of the assets held at 1 July 20X4 was more than three years old.
What is the charge for depreciation of plant and machinery for the year ended 30 June 20X5?
4 A motor car was purchased in May 20X2 for GH₵7.8 million. The accounting policy is depreciation at 20% straight line on the cost of the assets in use at the year end. The car was traded in for a replacement vehicle purchased in July 20X5 with the agreed part exchange value being GH₵2.4 million. The company’s year-end is 31 December.
What was the profit or loss on disposal?
5 A business purchased some land and buildings on 1 January 20X1 for GH₵800 million (land GH₵250 million and buildings GH₵550 million). The buildings are to be depreciated over a period of 50 years.
On 1 January 20X5 the land and buildings were revalued to GH₵1,500 million (land GH₵400 million and buildings GH₵1,100 million). At this date the buildings were believed to have a remaining useful life of 40 years.
What is the original depreciation charge for the buildings and the revised charge from 1 January 20X5?
6 A business purchased land for GH₵250 million and buildings for GH₵400 million on 1 January 20X1. The buildings were to be depreciated over a period of 50 years. On 1 January 20X5 the land was revalued to GH₵520 million and the buildings were revalued at GH₵750 million.
What amount is to be taken to the revaluation reserve on 1 January 20X5?
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