IAS 16 Property, Plant and Equipment Questions with Solutions

There is a complete guide on Property, Plant and Equipment in IAS 16. The treatment is same both under IASB and US GAAP. Following example will help you understand the practical approach on how to record the tangible fixed assets in your books of accounts.

Property, Plant and Equipment Questions with Solutions

Problem: Following are the details of the fixed asset of Digit as at 31 December 20X5:

Cost $.000Depreciation $.000Net Book Value $.000
Plant and machinery390140250
Fixtures and fittings Assets (This is under construction)9191

During the year 20X6, following transaction occurred:

Additional cost of $53,000 incurred on Building. A building costing $100,000 finished during this year.

A new high configuration based computer system was requested during the year from IT department. Though, it was not acquired during the year, an advance deposit of $20,000 was paid.

New plant has been added costing $154,000

During the year, $40,000 additions were made to fixtures. This excludes the deposit that was paid for the computer system as mentioned above.

During the year 20X6, following disposals of fixed assets occurred:

CostDepreciation brought forwardProceeds

On 1st January, 20X6, Land & Building revaluation was done by Ruby & Co, Chartered Surveyors. According to their valuation, the revalued amount was $1,500,000. However, the useful life of the building will remain unchanged. It has been 10 years since the purchase of the building.

Depreciation is charged on all assets in use at the year end with following rates:

Buildings2% p.a straight line method
Plant & Machinery20% p.a straight line method
Furniture & Fixtures25% p.a reducing balance method . . . See our Excel Guide

Required: Prepare the disclosure under IAS 16 for the year ended December 31, 20X6.

Land & BuildingPlant & MachineryFurniture & FixAsset under ConstructionTotal
Cost at 1 January9001,613390912,994
adjustment entry
Additions during the period1544073(W1) 267
Disposals during the period(277)(41)(318)
As at 31 December 20161,6001,490389643,543
At 1 January 201680458140678
Provisions for year1729870385
At 31 December 201617561179757
Written down value1,583929210642,786
CostLand and buildings $.000
Brought forward from previous year900
Carried forward1,000
Brought forward80
For the Year10
Carried forward90
Net book value of Land & Building910


(1)Additions to assets under construction53
Deposit on computer20

Depreciation on buildings 600/40 + (100 / 2%) = $.17,000
2% straight line depreciation = 50 year useful life. The buildings are 10 years old at the time of valuation. This means that remaining useful life is 40 years.

Depreciation on plant & machinery (1,613 + 154 – 277) / 20% = $.298,000

Depreciation – furniture & fixtures (390 + 40 – 41 – 140 + 31) / 25% = $.70,000