CAF-01: FAR-1 Property, plant and equipment (IAS-16)
Lecture 6 (IAS-16) Lecture 6 (overall)
Classwork:
1. Solved question 35 from lecture 5 handout;
2. Explained journal entry of disposal;
3. Started Disposal of fixed assets under reducing balance method and Solved question 34 and 36
from chapter 7 of Crescent book:
Question-34
Following balances are appearing in the books of Rehmat as on 1.1.12.
Asset 900,000
Acc. Dep. 200,000
Additions of Rs.90,000 is made on 1.8.12. Further an asset costing Rs.80,000 as on 1.4.09 is
disposed of on 30.6.12 for Rs. 45,000 only. Rate is 10% WDV.
Required: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31.12.12.
Question-36
Following balances are appearing on 1.1.2014.
Plant A/C 400,000
Acc. Dep. A/C 150,000
Addition of Rs.30,000 took place on 1st March 2014. An asset which was purchased on 1st May 2011
costing Rs.90,000 was disposed off on 30th September 2014 for Rs.12,000 only. Dep rate is 20% WDV.
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31.12.14.
Homework:
Question-37
Following balances are appearing on 1.Oct.13.
Cost 30,000
Acc. Dep. 12,000
Details of Disposal:
D.O.P D.O.S Cost Sale Proceed
1.3.2011 31.12.13 10,000 2,000
1.2.2010 31.3.14 4,000 1,000
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 30.Sep.14. Rate is 10% WDV.
Question-38
Following details are provided on 1.1.2010.
Asset A/C 90,000
Acc. Dep. A/C 50,000
An asset costing Rs. 10,000 is added on 1.mar.2010. Further an asset which was purchased on
1.4.2008 costing
Rs. 20,000 is disposed off on 30.6.2010 for Rs. 10,000 only. Dep rate is 10% S.L.
Required: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31.12.10 along with journal entries of
disposals.
Umair Sheraz Utra, ACA. Page |1
CAF-01: FAR-1 Property, plant and equipment (IAS-16)
Question-10 (Practice questions from chapter 1 of Crescent book)
Mr. Sannan has provided you with following information:
Accumulated
Cost
Depreciation
1.1.07 1.1.07
Building 2,300,000 800,000
(i) Detail of addition for year ended Dec. 31, 2007
On February 01, 2007 400,000
On April 01, 2007 650,000
(ii) Details of Disposal for year ended Dec. 31, 2007
Date of sale Date of Purchase Cost Sale proceeds
31.08.07 1.1.04 550,000 450,000
31.05.07 1.9.05 700,000 300,000
(iii) Depreciation rate is 10% on diminishing balance method.
Required:
Prepare relevant accounts for the year ended December 31, 2007? (8)
Question-11 (Practice questions from chapter 1 of Crescent book)
Mr. Saad has provided you with following information:
Accumulated
Cost as on Rate
Depreciation
1.1.2012 as on 1.1.2012 S.L
Plant and Machinery 600,000 200,000 20%
Following is the addition made for year ended December 31, 2012.
Date Cost
Plant and Machinery 1.2.2012 70,000
During the year a plant purchased on 1.7.2009 having book value of Rs. 15,000 is sold on 31.3.2012 for
Rs. 15,800.
Required:
Prepare relevant accounts for year ended December 31, 2012 only. (6)
Question-12 (Practice questions from chapter 1 of Crescent book)
Mr. Umer has provided you with following information:
Accumulated
Cost as on Depreciation Rate
1.1.2012 as on 1.1.2012 W.D.V
Plant and Machinery 500,000 150,000 20%
Following is the addition made for year ended December 31, 2012.
Date Cost
Plant and Machinery 1.2.2012 77,000
During the year a plant purchased on 1.8.2009 having book value of Rs. 12,000 is sold on 31.3.2012 for
Rs. 16,300.
Required:
Prepare relevant accounts for year ended December 31, 2012 only. (6)
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CAF-01: FAR-1 Property, plant and equipment (IAS-16)
Answer-10
Dr. Building A/C Cr.
1.1.07 b/d 2,300,000 31.5.07 Disposal 700,000
1.2.07 Cash 400,000 31.8.07 Disposal 550,000
1.4.07 Cash 650,000 31.12.07 c/d 2,100,000
Dr. Accumulated Dep. a/c Cr.
Disposal (W-2) 175,780 b/d 800,000
Disposal (W-2) 116,375 Depreciation Exp. (W-1) 186,527
c/d 694,372
Dr. Disposal a/c Cr.
Building A/C 550,000 Accumulated Dep. 175,780
Building A/C 700,000 Accumulated Dep. 116,375
Cash 450,000
Cash 300,000
P/L (Bal.) 207,845
(W-1) Depreciation Expense
On opening assets excluding disposal Rate
Opening WDV (2,300,000 – 800,000) 1,500,000
Less: WDV of Disposal as on 1.1.07 (W-2) (400,950 + 609,000) (1,009,950)
490,050 10% 49,005
On addition
− (400,000 10% 11/12) 36,667
− (650,000 10% 9/12) 48,750 85,417
On Disposal (W-2) (26,730 + 25,375) 52,105
Total 186,527
(W-2)Accumulated Depreciation of Disposal
Disposal on 31 Aug 07
Cost 550,000
Dep. (04) (550,000 10%) (55,000)
WDV (1.1.05) 495,000
Dep. (05) (495,000 10%) (49,500)
WDV (1.1.06) 445,500
Dep. (06) (445,500 10%) (44,550)
WDV (1.1.07) 400,950
Dep. (07) (400,950 10% 8/12) (26,730)
WDV (as on 31.08.07) 374,220
Accumulated Depreciation (550,000 – 374,220) 175,780
Disposal on 31 May 07
Cost 700,000
Dep. (05) (700,000 10% 4/12) (23,333)
WDV. (1.1.06) 676,667
Dep. (06) (676,667 10%) (67,667)
WDV (1.1.07) 609,000
Umair Sheraz Utra, ACA. Page |3
CAF-01: FAR-1 Property, plant and equipment (IAS-16)
Dep. (07) (609,000 10% 5/12) (25,375)
WDV (as on 31.May.07) 583,625
Accumulated Depreciation (700,000 – 583,625) 116,375
Answer-11
Dr. Plant and machinery – At cost Cr.
b/d 600,000 Disposal (W-1) 33,333
Cash 70,000 c/d 636,667
Dr. Accumulated depreciation a/c Cr.
Disposal (W-1) 18,333 b/d 200,000
c/d 309,500 Depreciation (W-2) 127,833
Dr. Disposal Account Cr.
Plant account 33,333 Accumulated depreciation 18,333
P/L 800 Cash 15,800
Workings
(W-1) Accumulated depreciation of disposals of machinery
Number of years the asset is used (1.7.2009 – 31.3.2012) 2 years and 9 months
Cost (in percentage) 100%
Accumulated depreciation (in percentage) (20% per year 2.75Y) 55%
Book value at time of disposal (in percentage) (100% – 55%) 45%
Cost on 1.7.2009 (in rupees) (15,000/45 100) 33,333
Accumulated depreciation on 30.03.2012 (in rupees) (33,333 – 15,000) 18,333
(W-2) Depreciation
Depreciation - on opening assets excluding disposals
Opening assets 600,000
Disposals (33,333)
566,667 20% 113,333
Depreciation – on additions (70,000 20% 11/12) 12,833
Depreciation – on disposals (33,333 20% 3/12) 1,667
127,833
Answer –12
Dr. Plant and machinery - At cost Cr.
b/d 500,000 Disposal (W-1) 21,531
Cash 77,000 c/d 555,469
Dr. Accumulated depreciation a/c Cr.
Disposal (W-1) 9,531 b/d 150,000
c/d 272,692 Depreciation (W-2) 82,223
Umair Sheraz Utra, ACA. Page |4
CAF-01: FAR-1 Property, plant and equipment (IAS-16)
Dr. Disposal Account Cr.
Plant account 21,531 Accumulated depreciation 9,531
P/L 4,300 Cash 16,300
WORKINGS
(W-1) Accumulated depreciation of disposals
Assume cost to be 100
Cost (1.08.2009) 100
Depreciation (2009) (100 20% 5/12) (8.3333)
WDV 91.6667
Depreciation (2010) (91.6667 20%) (18.3333)
WDV 73.3334
Depreciation (2011) (73.3334 20%) (14.6667)
WDV 58.6667
Depreciation (2012) (58.6667 20% 3/12) (2.9333)
WDV (31.03.2012) 55.7334
Cost of disposals (12,000 / 55.7334 100) 21,531
Accumulated depreciation of disposals (21,531 – 12,000) 9,531
(W-2) Depreciation
Depreciation - on opening assets excluding disposals
Opening assets WDV (500,000 – 150,000) 350,000
Disposals WDV (21,531 / 100 58.6667) (12,632)
337,368 20% 67,474
Depreciation - on additions (77,000 20% 11/12) 14,117
Depreciation - on disposals (12,000 / 55.7334 2.9333) 632
82,223
Umair Sheraz Utra, ACA. Page |5
