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

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FA – May 2012 – L1 – SB – Q5 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Recording journal entries for three trade-in options for machinery and selecting the most viable option.

Question

Fancy Enterprises has machinery that cost N750,000 with an accumulated depreciation of N510,000. The firm is contemplating acquiring new machinery to replace the old one. The new machinery has a catalog price of N1,290,000 and attracts a 12% trade discount. The following options are available:

(i) Trade in the old machinery and add cash of N895,200.
(ii) Trade in the old machinery and add cash of N600,000.
(iii) Trade in the old machinery and add cash of N1,080,000.

You are required to:

(a) Record journal entries for each of the options, considering the information provided above.
(b) Which of the options is economically viable for the firm to acquire the new machinery?
(14 Marks)

Answer

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Tags: Depreciation, Journal Entries, Machinery Trade-In
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2012

FA – May 2012 – L1 – SA – Q29 – Accounting for Property, Plant, and Equipment (IAS 16)

Calculating the cost of a moulding machine to be stated in the financial statement.

Question

Ishola & Sons Limited purchased a moulding machine for N2,550,000 from Japan, the transport expenses amounted to N250,000, installation cost amounted to N150,000, and the annual maintenance is N170,000. At what cost will the moulding machine be stated in the statement of financial position?

Answer

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Tags: Asset Valuation, Financial Position, machinery
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2012

FA – May 2012 – L1 – SA – Q7 – Accounting for Property, Plant, and Equipment (IAS 16)

Identifying the correct accounting entry for an increase in asset value due to revaluation.

Question

Which accounting entries should be raised to record an increase in the value of assets on revaluation by the partners?

A. Debit revaluation account and credit partners’ capital account
B. Debit partners’ capital account and credit revaluation account
C. Debit revaluation account and credit partners’ current account
D. Debit revaluation account and credit assets account
E. Debit assets account and credit revaluation account.

Answer

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Tags: Asset Valuation, Partnership Accounts, Revaluation
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2012

FA – May 2012 – L1 – SA – Q5 – Accounting for Property, Plant, and Equipment (IAS 16)

Identifying features of non-current assets under IAS 16.

Question

According to IAS 16 – “Accounting for Property, Plant and Equipment” all of the following are features of non-current assets EXCEPT where they are:

A. Held by an enterprise for use in the production or supply of goods and services
B. Expected to be used on a continuing basis
C. Intended for sale in the ordinary course of business
D. Financed by leasehold rights
E. Held for rental to others, or for administration purpose.

Answer

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Tags: Asset Valuation, IAS 16, Non-current Assets
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2012

FA – Nov 2011 – L1 – SA – Q17 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

This question asks for the term used to describe the amount agreed to be paid by a tenant to a landlord.

Question

The amount agreed to be paid by a tenant to a landlord for the use of his property for economic reasons is known as?

Answer

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Tags: Rent, Tenancy
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2011

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

FA – Nov 2020 – L1 – SA – Q14 – Accounting for Property, Plant, and Equipment (IAS 16)

Identifies an item to be classified as capital expenditure.

Question

Which of the following should be classified as capital expenditure?
A. Penalty paid to a supplier for late payment in respect of plant supplied
B. Interest payable on loan used exclusively for the production of self-constructed PPE
C. Staff training cost on the use of equipment
D. Legal fees on debt recovery
E. Bonuses to production operatives

Answer

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Tags: Capital Expenditure, Expense Classification
Level: Level 1

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

FA – Nov 2012 – L1 – SA – Q9 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Identifying what does not lead to improvement of property, plant, and equipment.

Question

Which of these may NOT lead to improvement in respect of Property, Plant and Equipment?

A. Extension of economic life of the asset
B. Repairs and maintenance of asset
C. Increased quality of output
D. Faster production
E. Reduced operating costs

Answer

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Tags: Equipment, Improvements, Plant, Property
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2012

FA – Nov 2013 – L1 – SA – Q36 – Accounting for Property, Plant, and Equipment (IAS 16)

Understanding the term for when the carrying amount of an asset exceeds its recoverable amount under IAS 16.

Question

In accordance with IAS 16 (Property, Plant and Equipment), the amount by which the carrying amount of an asset exceeds its recoverable amount is called ____________.

Answer

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Tags: Asset Valuation, IAS 16, Impairment Loss
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q25 – Accounting for Property, Plant, and Equipment (IAS 16)

Understanding the term for a new value resulting from revaluation under IAS 16.

Question

According to IAS 16 (Property, Plant, and Equipment), the new value as a result of a revaluation exercise carried out on property, plant, and equipment, within the context of the historical cost system is called ____________.

Answer

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Tags: and Equipment, IAS 16, Plant, Property, Revaluation
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2013

FA – Nov 2015 – L1 – SA – Q19 – Accounting for Property, Plant, and Equipment (IAS 16)

This question identifies which cost should not be included in the initial measurement of property, plant, and equipment.

Question

Which of the following costs should NOT be included in the initial measurement of property, plant and equipment?
A. Purchase price
B. Site preparation cost
C. Professional fees
D. Installation cost
E. Site administration and general overhead costs

Answer

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Tags: Accounting principles, Initial Measurement, Plant and Equipment, Property
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2015

FA – May 2018 – L1 – SA – Q19 – Accounting for Property, Plant, and Equipment (IAS 16)

Determines the profit or loss on the disposal of a vehicle after depreciation.

Question

A vehicle was purchased on January 1, 2011, at a cost of N2,000,000 and was depreciated at 25% on cost. It was sold on December 31, 2013, for N1,400,000. Full-year depreciation was charged in the years of purchase and disposal. Determine the profit or loss on the disposal:
A. N900,000 loss
B. N500,000 loss
C. N500,000 profit
D. N900,000 profit
E. N1,150,000 profit

Answer

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Tags: Asset Disposal, Depreciation, Profit or Loss Calculation
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2018

FA – May 2018 – L1 – SA – Q10 – Accounting for Property, Plant, and Equipment (IAS 16)

Identifies the correct definition of non-current assets based on their usage.

Question

Which of the following is the definition of non-current assets?
A. Assets held for trading purposes
B. Assets which are used for production and services over a number of years
C. Assets that are expected to be realized within normal operating cycle
D. Assets that are expected to be realized within a year
E. Assets expected to be consumed in ordinary course of business

Answer

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Tags: Asset Definition, IAS 16, Non-current Assets
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2018

FA – Nov 2021 – L1 – SB – Q6b – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

This question involves calculating the gain or loss on the disposal of an old vehicle and preparing ledger accounts.

Question

Propati Limited has a fleet of motor vehicles that are used to distribute goods to the market. As at July 2020, the cost of the vehicles was ₦750,000,000 and their accumulated depreciation was ₦30,500,000. On January 1, 2021, the company bought a new vehicle for ₦2,800,000. One of the old vehicles, which was acquired 3 years ago at a cost of ₦1,000,000 with accumulated depreciation of ₦600,000, was accepted by the seller in part-exchange at a value of ₦480,000.

Required:
i. Calculate the gain or loss on disposal of the old car. (2 Marks)
ii. Prepare the following ledger accounts in respect of the transactions:

Motor vehicles account (4 Marks)
Accumulated depreciation account (2 Marks)
Disposal of asset account (2 Marks)

Answer

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Tags: Disposal of assets, Gain or Loss, IAS 16, Ledger Accounts
Level: Level 1

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

FA – Nov 2021 – L1 – SB – Q6a – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

This question requires the disclosure requirements under IAS 16 for Property, Plant, and Equipment

Question

IAS 16 – Property, Plant, and Equipment requires an entity to make certain disclosures in the financial statements for each major class of property, plant, and equipment.

Required:
State FIVE of the disclosures required under IAS 16. (10 Marks)

Answer

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Tags: and Equipment, Financial Disclosures, IAS 16, Plant, Property
Level: Level 1

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

FA – May 2022 – L1 – SB – Q2b – Accounting for Property, Plant, and Equipment (IAS 16)

Compute the initial cost of a machine using cost elements like purchase price, clearing, installation, and adjustments.

Question

The following cost items are extracted from the books of Ore Limited regarding a machine acquired on June 1, 2020:

Cost Items	₦
Clearing cost	6,000
Installation and testing charge	24,000
Purchase price	600,000
Purchase of spare parts (inclusive of VAT at 7.5%)	6,400

Additional information:

Rebate is provided at 5% of maintenance cost of ₦44,600.

Required:
Compute the initial cost of the machine.

Answer

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Tags: IAS 16, Initial Cost, Machine Valuation
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2022

FA – May 2022 – L1 – SB – Q2a – Accounting for Property, Plant, and Equipment (IAS 16)

List general requirements of IAS 16 related to the depreciation of Property, Plant, and Equipment.

Question

List FOUR general requirements of IAS 16 – Property, Plant, and Equipment, as regards depreciation.

Answer

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Tags: and Equipment, Depreciation, IAS 16, Plant, Property
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2022

FA – May 2022 – L1 – SA – Q10 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Identify when depreciation should commence for an asset purchased and stored before use.

Question

An equipment was paid for on January 16, 2015, delivered on January 16, 2016, kept in store till January 16, 2017, commissioned on January 16, 2018, and put into use on January 16, 2019. The entity’s accounting date is December 31. Which date should depreciation commence on this equipment?

A. January 16, 2015
B. January 16, 2016
C. January 16, 2017
D. January 16, 2018
E. January 16, 2019

Answer

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Tags: Asset Use, Depreciation, Financial Reporting
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2022

FA – May 2022 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Calculate the amount of depreciation charged for the year after adjusting the useful life of an asset.

Question

What is the amount of depreciation charged in 2018 after adjusting the useful life of the plant as described in Q3?

A. ₦30,000
B. ₦52,500
C. ₦60,000
D. ₦67,500
E. ₦80,000

Answer

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Tags: Accounting Estimate, Depreciation, Plant, Straight-Line Method
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: MAY 2022

FA – Nov 2022 – L1 – SB – Q6c – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

This question asks for the calculation of depreciation on revalued property and adjustments to account for revaluation gains and losses.

Question

Explain how revaluation of property, plant and equipment affects the calculation of depreciation and the adjustments to revaluation surplus or deficit.
(5 Marks)

Answer

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Tags: and Equipment (IAS 16), Depreciation, Plant, Property, Revaluation
Level: Level 1