IAS16 PPE
Eg. 1 (amended ACCA)
Samudra Bhd’s cruise ship comprise of the following on 1 January 2009:
Component
Cost (million)
 Ship’s fabric (hull, decks etc)
300
 Cabins and entertainment area fittings
150
 Propulsion system
100
Useful life
25 yrs (SLM)
12 yrs (SLM)
4 yrs (SLM)
Required:
Show the extract of Samudra’s statement of financial position as at 31 December 2009.
Other eg. – Aircraft (body; engine; etc)
Eg. 2 (FAR400:Q4(b)-APR’07)
On 1 January 2007, Jay Bee Bhd bought an excavator machine for its mining operation on an
instalment basis. The cost of the machine was RM700,000. The first instalment of RM500,000 was
paid on 1 January 2007 and the second instalment amounting to RM200,000 will be paid on 31
December 2008. Jay Bee also paid incidental cost i.e to install the machine amounting to RM20,000
in relation to the acquistion of the machine.
The environmental department requires that the machine be dismantled after its life span. The cost
of dismantling the machine is estimated at RM10,000 and the estimated life span of the machine is 5
years. The weighted average cost of capital of Jay Bee is 10% per annum. Jay Bee closes its accounts
on 31 December each year. The discount factor of the present value of RM1 is as follows:
Period
1
2
3
AdibahJD:\231209109.doc
Discount factor at 10%
0.90909
0.82645
0.75131
4
5
0.68301
0.62092
Required:
i. Calculate the initial measurement of the excavator machine as at 1 January 2007
ii. Prepare the journal entries to record the above transactions as at 1 January 2007
(5 marks)
0
Eg. 3
A chemical factory need to install an environmental equipment to its existing machine so that once it
is installed, the machine will not polute air anymore. CV of the existing machine is RM100,000 and its
recoverable amount(RA) is RM100,000. The environmental equipment will cost the factory RM10,000
but its RA (individually) is RM8,000. However, once installed, the factory can sell the machine to
external market at RM109,000. What is the CV of the machine?
Eg. 4 (J.Lazar & Huang.CC; FRS for Msia)
A acquired three pieces of land on 1.1.X1. These properties were revalued every 5 years. The
following relates to the three pieces of land.
Land
A
B
C
Cost
1.1.X1
400,000
400,000
300,000
Revalued amount on:
1.1.X6
1.1.X11
500,000 650,000
300,000 285,000
450,000 350,000
1.1.X16
480,000
485,000
Sold for 370,000
Required:
Show the journal entries. (Ignore defered tax).
AdibahJD:\231209109.doc
100,000
15,000
115,000
85,000
Cr RE
Eg. 5 (J.Lazar & Huang.CC; FRS for Msia)
50,000
Ace acquired a plant costing RM200,000 on 1.1.X1 and the estimated useful life on 1.1.X1 was 10
years. On 1.1X4, the plant was revalued to RM180,000 and useful life was determined to be another
7 years. On 1.1.X6, the plant was disposed of for RM120,000. The accumulated depreciation is to be
eliminated on revaluation.
Required:
Show the necessary ledger accounts.
AdibahJD:\231209109.doc
Eg. 6 (FAR400:Q1(b)-APR’06)
Baba acquired a new machine at a cost of RM300,000 on 1 January 2003. The machine had an
estimated useful life of 8 years with a residual value of RM4,000. On 1 January 2005, the director
agreed, after a review had taken place, that the remaining useful life of the machine should be
increased by another 3 years from the date of review. The residual value remains unchanged.
Depreciation is calculated using the straight line method.
Required:
i. State the criteria in determining the useful life of depreciable assets
(2 marks)
ii. Calculate the depreciation for the machine for the year ended 31 December 2005 (3 marks)
AdibahJD:\231209109.doc