MGT401 Financial Accounting II Assignment No.1 Fall Semester 2012

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MGT401 Financial Accounting II Assignment No.1 Fall Semester 2012

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FINANCIAL ACCOUNTING II (MGT401)
FALL 2012
ASSIGNMENT NO. 1
DUE DATE: 27TH NOVEMBER, 2012
MARKS: 20
Topic to be tested
 Property, Plant and Equipment (IAS-16)
Learning objectives:
 To learn about the correct costing of Plant asset as per IAS-16
 To learn about the depreciation schedule
 To learn about the calculation of profit or loss on sale of plant asset.
Assignment Question:
Manufacturing Private Limited (MPL) purchased a plant on 1st January 2003. The following details are
applicable to this transaction:
Particulars
Amounts
Rs.
Purchase price 149,340
Delivery cost 4,221
Installation cost 6,579
General and administration cost 1,000
Cost of testing 5,000
Pre-production cost 2,000
Initial operating losses 10,000
Total 178,140
Additional information:
 The purchase price of Rs. 149,340 is payable on 31st December 2003. Normally vendors do not
provide such plants on credit basis. The current market interest rate is 14% per annum.
 All administrative costs are of indirect nature.
 In order to check that the plant is working properly or not some sample products have been made
from this plant and the cost incurred on these samples are included in the testing cost. These
samples were sold at net proceeds of Rs.500. This cost is considered necessary by the
management in order to check the plant’s initial capacity.
 The initial operating losses are charged to the initial production of small lots.
 The plant was ready on 3rd January 2003 and immediately put into use.
 It is decided to depreciate the plant on straight line method over 8 years; taking into account the
residual value of plant is Rs. 7,000.
 It is assumed that the liability to dismantle and remove the machine exists at the end of its useful
life at a cost of Rs. 3,500 (discounted present value if Rs. 1,700).
 At the end of 8th year plant was sold at Rs. 10,000.
 Ignore value added tax.
Required
1. Determine the plant’s cost to be recognized in MPL’s books as per IAS 16. (Marks: 10)
2. Prepare a depreciation schedule of plant for 8 years by following the format given below.
(Marks: 08)
3. Calculate the amount of profit or loss on disposal of the plant. (Marks: 02)
IMPORTANT:
24 hours extra / grace period after the due date is usually available to overcome uploading
difficulties. This extra time should only be used to meet the emergencies and above mentioned
due dates should always be treated as final to avoid any inconvenience.
Years Cost
Rs.
*Depreciation
Rs.
Accumulated
Depreciation
Rs.
Carrying
Value
Rs.
2003
2004
2005
2006
2007
2008
2009
2010
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
 Make sure to upload the solution file before the due date on VULMS.
 Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
 Use the font style “Times New Roman” or “Arial” and font size “12”.
 It is advised to compose your document in MS-Word format.
 You may also compose your assignment in Open Office format.
 Use black and blue font colors only.
REFERENCING GuIDELINES:
 Use APA style for referencing and citation. For guidance search “APA reference style”
in Google and read various website containing information for better understanding or
visit
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
 It is submitted after the due date.
 The file you uploaded does not open or is corrupt.
 It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.
 It is cheated or copied from other students, internet, books, journals etc.