Plant and equipment

FR – L2 – Q27 – Investment Properties

Explain accounting treatment for Vantage Ltd's properties in financial statements for 31 Dec Year 8, noting profit/loss impact.

Question

Vantage Ltd owns several properties and has a year end of 31 December. Wherever possible, Vantage Ltd carries investment properties under the fair value model.

Property 1 was acquired on 1 January Year 1. It had a cost of GHC1 million, comprising GHC500,000 for land and GHC500,000 for buildings. The buildings have a useful life of 40 years. Vantage Ltd uses this property as its head office.

Property 2 was acquired many years ago for GHC1.5 million for its investment potential. On 31 December Year 7 it had a fair value of GHC2.3 million. By 31 December Year 8 its fair value had risen to GHC2.7 million. This property has a useful life of 40 years.

Property 3 was acquired on 30 June Year 2 for GHC2 million for its investment potential. The directors believe that the fair value of this property was GHC3 million on 31 December Year 7 and GHC3.5 million on 31 December Year 8. However, due to the specialised nature of this property, these figures cannot be corroborated. This property has a useful life of 50 years.

Required

(a) For each of the above properties briefly state how it would be treated in the financial statements of Vantage Ltd for the year ended 31 December Year 8, identifying any impact on profit or loss.

(b) Produce an analysis of property, plant and equipment for Vantage Ltd for the year ended 31 December Year 8, showing each of the above properties separately.

Answer

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Tags: Depreciation, Fair Value, Financial Statements, Investment Properties, Plant and equipment, Property
Level: Level 2

Topic: Preparation of Financial Statements

FA – L1 – Q25 – Non-current assets and depreciation

Adjust plant and equipment and accumulated depreciation accounts for Akosua Pharmaceuticals Limited for errors in 20X9 financial statements.

Question

The draft statement of financial position of Akosua Pharmaceuticals Limited as on December 31, 20X9, depicts the following:

Description	GH¢
Plant and equipment – Cost	12,387,060
Less: Accumulated Depreciation	(4,792,540)
	7,594,520

On reviewing the accounts of the business, its auditor found that the records have been correctly maintained except for the following events:
(i) On January 17, 20X9, a contract was signed for the purchase of a packaging machine from Kofi Enterprises Limited for GH¢1,125,000 which is to be delivered on July 17, 20Y0. The company paid an advance of GH¢450,000 on the signing of the contract and the balance was to be paid on delivery of the machine. The advance was debited to the plant and equipment account.
(ii) Installation of a production machine was completed on January 21, 20X9. The cost of the machine of GH¢2,700,000 was debited to the plant and equipment account. The cost of installation amounting to GH¢300,000 had been debited to a repairs account.

Depreciation is charged on a reducing balance method at 10% per annum. Depreciation on new assets commences in the month in which the asset is acquired.
The depreciation expense for the year 20X9 have been correctly calculated and recorded except for the impact of errors discussed above.

Required
Determine the correct balances as at December 31, 20X9 by recording appropriate adjustments in the following accounts:
(a) Plant and equipment
(b) Accumulated depreciation – plant and equipment

Answer

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Tags: Accounting errors, Adjustments, Depreciation, Financial Statements, Ledger accounts, Non-current Assets, Plant and equipment, Reducing Balance Method
Level: Level 1

Topic: Non-current assets and depreciation

Tag (SQ): Plant and equipment

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FR – L2 – Q27 – Investment Properties

Explain accounting treatment for Vantage Ltd's properties in financial statements for 31 Dec Year 8, noting profit/loss impact.

FA – L1 – Q25 – Non-current assets and depreciation

Adjust plant and equipment and accumulated depreciation accounts for Akosua Pharmaceuticals Limited for errors in 20X9 financial statements.

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Tag (SQ): Plant and equipment

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FR – L2 – Q27 – Investment Properties

Explain accounting treatment for Vantage Ltd's properties in financial statements for 31 Dec Year 8, noting profit/loss impact.

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FA – L1 – Q25 – Non-current assets and depreciation

Adjust plant and equipment and accumulated depreciation accounts for Akosua Pharmaceuticals Limited for errors in 20X9 financial statements.

You're reporting an error for "FA – L1 – Q25 – Non-current assets and depreciation"

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