1) The boat satisfies the definition of property, plant and equipment as

mentioned in paragraph 6 of the NZIAS 16. The two main criterion

for an item to be classified as an asset are as follows a) If the
respective tangible item is held for production of goods or services,
for rental activates and administrative purposes b) the respective
tangible item is used for more than one period. Dolphin Watching
Ltd meets the mentioned criterion as the boat is a tangible asset
used as a service vehicle to transport its customer for whale and
dolphin watch, the boat is further used for weddings and parties
which would generate cash flow for the company. The body of the
boat and its new engine are expected to operate for a period of 20
years which is more than one period.
2)

01/04/2011 Purchase of boat-body

Dr

$1,500,000

Purchase of boat-engine

Dr

$500,000

Cash spend

Cr

$2,000,000
Dolphin Watching Ltd Purchased of the boat
31/03/2012 Depreciation expense boat-body

Dr

$70,

000
Accumulated depreciation boat-body

Cr

$70, 000
Depreciation expense on boat-engine

Dr

$50,000
Accumulated depreciation boat-body

Cr

$50,000
Depreciation expenses for the year
31/03/2013 Depreciation expense boat-body

Dr

$70,

000
Accumulated depreciation boatbody

Cr

$70, 000

Depreciation expense on boat-engine

Dr

Accumulated depreciation boat-body

Cr

$50,000
$50,000
Depreciation expenses for the year
31/03/2014

Depreciation expense boat-body

Dr

$70, 000
Accumulated depreciation boat-body

Cr

$70, 000
Depreciation expense on boat-engine

Dr

$50,000
Accumulated depreciation boat-body

Cr

$50,000
Boat-engine written off due to damage

Dr

$350,000
Accumulated depreciation boat-body

Dr

$150,000
Cost involved in buying the boat engine

Cr

$500,000
Damaged engine written off for the year
1/04/2014

Purchase of new engine for boat

Dr

$700,000
Cash
Cr

spend

on

new

engine

$700,000

31/03/2015

Depreciation expense on new engine

Dr

$41,176
31/03/2015

Accumulated depreciation on boat engine

Cr

$41,176
31/03/2015

Depreciation expense boat-body

Dr

$70,

000
Accumulated depreciation boat-body

Cr

$70, 000
31/03/2015

Cash received for selling the boat

$1,500,000
31/03/2015

Accumulated depreciation

Dr

Main structure

Dr

$280,000
Engine

Dr

$41,176.47
31/03/2015

Loss

on

sale

Dr 378,823.23
31/03/2015

Main structure

31/03/2015

Engine

Cr

$1,500,000
Cr,

700,000

Dolphin Watching Ltd final sale of the boat

3) a) The company has estimated the lifespan of the boat body of boat
as 20 years.
b) Estimating a salvage value of 100,000 for the body of the boat
c) The expected life of the first engine of the boat for ten years and
the life expectance of the second engine of the boat for remaining
time i.e. for 17 years.
d) Zero salvage value for both the engines of the boat.
2a) Paragraph 16a and 16b of the NZIAS report states that cost of
an item of plant, property and equipment comprises its purchase
price and any prices involved in bringing the asset to an operating
condition. The cost of the property would be 800,000 for the land
and 700,000 for the building totalling 1,500,000 as of 1 July 2012.
As the company has spent 80,000 in bringing the property to
operating condition the company property would be possessing a
land value of 800,000 and building value of 780,000 totalling
1,580,000 as of 1 September 2012
2b)
01/07/2012 Purchase of land

Dr

Purchase of building
Cash spend on land and building
$1,500,000

$ 800,000
Dr

$700,000
Cr

Purchase of property
01/09/2012

Building

Dr

$80,000

Cash spend for renovation

Cr

$80,000
31/06/2013

Depreciation on Building and renovation

Dr

$33,333
[10 months]
31/07/2013 Accumulated depreciation

Cr

$33,333
Recording depreciation expense for the year
01/07/2013

Building

01/07/2013

Building revaluation surpulus

Dr

$53,333
Cr

$53,333
01/07/2013

land

01/07/2013

land revaluation surpulus

Dr

100,000
Cr

$100,000
01/07/2013

Profit obtained after asset revaluation

$153,333

confirm

Cr