The following schedule of the movement of plant has been drafted for ABC Ltd for the...

 

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The following schedule of the movement of plant has been drafted for ABC Ltd for the year to 31 December 2021 Balance at 1 January 2021 Addition at cost (Note 1) Depreciation charge for the year Disposal (Note 4) Balance at 31 December 2021 Cost $000 1,624 460 (100) 1.984 Accumulated depreciation $000 650 396.8 1,046.8 Note 1 The addition to plant is made up of the followings: List price of plant Less: trade discount Early settlement discount Refundable sales tax Ancillary costs Shipping and handling costs Installation costs Pre-production testing Three year maintenance contract Site preparation costs Electrical cable installation Concrete reinforcement Own labour cost $000 420 (63) (7) 21 6.25 11.25 $000 350 10.5 4.5 10 12.5 34 38.5 460 ABC Ltd had incorrectly specified the power loading of the original electrical cable to be installed by the contractor. The company incurred $9,500 to correct this error; this is included in the above figure of $21,000. The plant is expected to last for 10 years. At the end of this period compulsory costs of $20,000 will be incurred to dismantle the plant and $5,000 to restore this site to its original condition. The disposal figure of $100,000 is the proceeds from the sale of an item of plant during the year. The plant had cost $300,000 on 1 January 2018 and had been correctly depreciated prior to disposal. Han Ltd charges depreciation of 10% per annum on the cost of plant held at the year end. Depreciation is not calculated at the year of disposal. Required Calculate the amount at which the initial cost of the addition to the plant should be measured (12 marks) Calculate the accumulated depreciation on the plant disposed of. (3 marks) Prepare a corrected schedule of the movements on the cost and accumulated depreciation of the plant as at 31 December 2021. (9 marks) Briefly describe ANY TWO purposes of providing depreciation on non-current assets (6 marks) (Total: 30 marks) The following schedule of the movement of plant has been drafted for ABC Ltd for the year to 31 December 2021 Balance at 1 January 2021 Addition at cost (Note 1) Depreciation charge for the year Disposal (Note 4) Balance at 31 December 2021 Cost $000 1,624 460 (100) 1.984 Accumulated depreciation $000 650 396.8 1,046.8 Note 1 The addition to plant is made up of the followings: List price of plant Less: trade discount Early settlement discount Refundable sales tax Ancillary costs Shipping and handling costs Installation costs Pre-production testing Three year maintenance contract Site preparation costs Electrical cable installation Concrete reinforcement Own labour cost $000 420 (63) (7) 21 6.25 11.25 $000 350 10.5 4.5 10 12.5 34 38.5 460 ABC Ltd had incorrectly specified the power loading of the original electrical cable to be installed by the contractor. The company incurred $9,500 to correct this error; this is included in the above figure of $21,000. The plant is expected to last for 10 years. At the end of this period compulsory costs of $20,000 will be incurred to dismantle the plant and $5,000 to restore this site to its original condition. The disposal figure of $100,000 is the proceeds from the sale of an item of plant during the year. The plant had cost $300,000 on 1 January 2018 and had been correctly depreciated prior to disposal. Han Ltd charges depreciation of 10% per annum on the cost of plant held at the year end. Depreciation is not calculated at the year of disposal. Required Calculate the amount at which the initial cost of the addition to the plant should be measured (12 marks) Calculate the accumulated depreciation on the plant disposed of. (3 marks) Prepare a corrected schedule of the movements on the cost and accumulated depreciation of the plant as at 31 December 2021. (9 marks) Briefly describe ANY TWO purposes of providing depreciation on non-current assets (6 marks) (Total: 30 marks)

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Computation of initial cost of addition to plant List price of plant Less Trade d... View the full answer