The following trial balance relates to Aesthetic Berhad, as of 31 December 2020:

DebitCredit

($’000)($’000)

Land and buildings - at cost (land RM0.8 million) 48,000

Plant and equipment - at a cost of 75,600

Accumulated depreciation on 1 January 2020

Buildings 16,000

Plant and Equipment 19,600

Additional Information:

1.It was decided by the directors of Aesthetic that the land and buildings were revalued to market value, as the last revaluation exercise was done 2 years ago. An independent valuer was appointed, and it was ascertained that on 1 January 2020 the value of the land was RM9,600,000 and the buildings at RM28,000,000.

The valuations were accepted by the directors. The remaining life of the buildings at that date was 10 years. Aesthetic does not make a transfer to retained earnings for excess depreciation. The plant and equipment are depreciated at 20% per annum based on the reducing balance method. The depreciation also is to be time apportioned. It is the practice of Aesthetic to charge depreciation to the cost of sales. However, no depreciation has yet been charged on any non-current asset for the year ended 31 December 2020.

2.A plant, costing RM480,000 and accumulated depreciation of RM238,000 as of 1 January 2020 was partly damaged when it was accidentally hit by a factory forklift on 1 July 2020. It was not deemed possible to repair the plant due to the difficulties in obtaining the replacement parts. The plant continues to operate although its productive capacity is significantly reduced. Due to the damage, it was estimated that the plant’s remaining life will only be for a further two years. The plant is estimated to have a current disposal value of RM15,000. The plant is currently depreciated at 20% of the cost. In two years’, time as the useful life of the plant ends, its disposal value will thus be correspondingly nil. An assessment of the productive capacity of the plant indicates that the present value of the plant in use is RM163,000. Aesthetic was offered to trade in the damaged plant at a value of RM135,000 against a replacement machine which costs RM750,000. No disposal costs are to be incurred for the replaced plant. The trade-in value is only applicable if the plant is replaced. Aesthetic is currently contemplating replacing the plant as it is concerned with the long-term demand for its products.

However, no further action is being initiated to furtherance the contemplation.

Required:

Prepare a note to show the movement of the PPE for the year ended 31 December 2020

Answer rating: 100% (QA)

Deprecation from 1 Jan to 1 July 2020 accident date for plant costing RM480000 and accumulated depre... View the full answer