IAS 16 Question 11

QUESTION 11 – IAS 16 PPE (ICAP C6 AUTUMN 2001 Q6)

Following are the assets of a company as on June 30, 2000:

Accumulated Rate of
Particulars Cost
Depreciation Depreciation
(Rs. in million) (%)
Land 78.000 ---
Factory building 167.000 68.523 10
Machinery 265.000 108.735 10
Factory Equipment 0.900 0.369 10
Office Equipment 0.800 0.328 10
Vehicles 4.600 2.931 20
Computers and Accessories 2.300 0.944 10

(a) One of the vehicles costing Rs. 600,000 included in cost purchased on 1 August, 1998
totally destroyed in accident on July 01, 1999. Insurance was not covered.
(b) Machinery included additions at the beginning of the year of Rs.35 million.
(c) An old machinery purchased on 1 September, 1996 amounting to Rs.30 million which was
sold at beginning of the year ended 30 June, 2000 for Rs.18 million credited to machinery
account.
(d) The company uses reducing balance method. The depreciation for the year has not been
charged yet.

Required:
Calculate depreciation for the year ended as on 30 June, 2000 after adjustment of above.
(10 marks)

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IAS 16 Question 11

ANSWER 11 – IAS 16 PPE (ICAP C6 AUTUMN 2001 Q6)

Depreciation on Rs. m
Land (not to be depreciated) Nil
Factory building Rs.[167 – 68.523] x 10% 9.8477
Machinery Rs.[(265 + 18 error – 30 disposal) – (108.735 – 7.725 disposal w1)] x 10% 15.1990
Factory equipment Rs.[0.900 – 0.369] x 10% 0.0531
Office equipment Rs.[0.800 – 0.328] x 10% 0.0472
Vehicles Rs.[4.60 – 0.6 disposal) – (2.931 – 0.11 disposal w2) x 20% 0.2358
Computer etc Rs.[2.3 – 0.944] x 10% 0.1356
Total depreciation 25.9435

W1 – Accumulated depreciation – Machinery disposed

Cost 30
1997 Depreciation 10% x 10/12 2.5
Carrying amount 1997 27.5
1998 Depreciation 10% 2.75
Carrying amount 1998 24.75
1999 Depreciation 10% 2.475
Carrying amount 1999 22.275
Rs. 2.5+2.75+2.475 = Rs. 7.725

W2 – Accumulated depreciation – Vehicles disposed

Rs. 0.600 x 20% x 11/12 = Rs. 0.11

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