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Sol Man - Pas 16 Property, Plant - Equipment

This document contains sample problems and solutions related to PAS 16 Property, Plant and Equipment. Problem 1 contains multiple choice questions about PAS 16. Problem 2 involves calculating depreciation expense and carrying amounts for equipment over two years using the straight-line method, revaluing the equipment, and calculating its effect. Problem 3 asks about the revaluation surplus that would result from increasing the fair value of equipment above its carrying amount and revising its annual depreciation. Problem 4 is calculating the gain or loss on sale of equipment that was previously revalued. The revaluation surplus is transferred directly to retained earnings and does not affect the sale calculation.

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402 views2 pages

Sol Man - Pas 16 Property, Plant - Equipment

This document contains sample problems and solutions related to PAS 16 Property, Plant and Equipment. Problem 1 contains multiple choice questions about PAS 16. Problem 2 involves calculating depreciation expense and carrying amounts for equipment over two years using the straight-line method, revaluing the equipment, and calculating its effect. Problem 3 asks about the revaluation surplus that would result from increasing the fair value of equipment above its carrying amount and revising its annual depreciation. Problem 4 is calculating the gain or loss on sale of equipment that was previously revalued. The revaluation surplus is transferred directly to retained earnings and does not affect the sale calculation.

Uploaded by

braveweb136
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PAS 16 Property, Plant and Equipment

PROBLEM 1: MULTIPLE CHOICE


1. A
2. C✔️
3. A
4. D
5. D - B
6. C✔️
7. A
8. B✔️
9. D✔️- PAS 16 does not prescribe any specific method. The
choice of depreciation method depends on management’s
judgment.
10. D

PROBLEM 2: FOR CLASSROOM DISCUSSION


1. D (800K – 10K + 20K + 40K + 30K + 10K) = 890,000

analysis:
10k is the trade discount, which is why we deducted it from
the purchase price.

The cost is not included since it was incurred.

2. B (890,000 – 90,000) ÷ 10 = 80,000;


890,000 – (80,000 x 2 years) = 730,000

analysis:

DEPRECIATION EXPENSE:
Substitute using the straight line method of depreciation
The historical cost is 890,000 and the residual value of
equipment useful life for 10 years is 90,000, so the mathematical
sign that we are going to use first is subtraction since the question
is asking how much is the depreciation expense in 20x1, x1
represented as a year, basically we have 10 years to provide, that’s
why we needed to divide it by 10 years, which resulted in an
equation of 80,000.

CARRYING AMOUNT- 12/31x2


Again, we have the 890,000 historical cost and the 80,000
depreciation expense for 1 year, so the remaining question is
looking for the carrying amount of equipment on Dec. 31, 20x2
(the x2 here again represents a 2-year period). We will repeat the
same process that we did for 890,000 and 90,000 on the previous
question; however, the last mathematical sign that we are going to
use is multiplication since we need it to multiply by 2 years, which
resulted in 730,000.

3. C 820,000 fair value – 73. 0,000 carrying amount on 12/31/x2 =


90,000; Revaluation surplus
(820,000 fair value – 90,000 residual value) ÷ 8 yrs. = 91,250
Revised annual depreciation

4. B (1,700,000 x 90%) – 1,900,000 = (370,000)


The revaluation surplus is transferred directly to retained
earnings. Therefore, it does not affect the gain or loss on the sale.

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