Wear Wraith (WW) Co.’s main activity is the extraction and supply of building materials including sand, gravel, cement, and similar aggregates. The company’s year end is December 31 and your firm has audited WW for a number of years. The main assets on the statement of financial position are non-current assets. The following draft non-current asset note for the financial statements has been prepared. The note has not been reviewed by the senior accountant and so may contain errors.

Non-current asset note (draft ):

Depreciation rates stated in the financial statements are all based on cost and calculated using the straight-line basis. The rates are:

• Land and buildings (2 percent)

• Plant and machinery (20 percent)

• Motor vehicles (33 percent)

• Railway trucks (20 percent)

Disposals in the motor vehicles category relate to vehicles that were five years old.

– Land and buildings relate to company offices and land for those offices.

– Plant and machinery include extraction equipment such as digge and dump trucks used to extract sand and gravel, etc.

– Motor vehicles include large trucks to transport the sand, gravel, etc.

– Railway trucks are containers used to transport sand and gravel over long distances on the railway network.

Required

a. List the audit work you should perform on railway trucks.

b. You have just completed your analytical procedures of the non-current assets note.

i. Excluding railway trucks, identify and explain any issues with the non-current asset note to raise with management.

ii. Explain how each issue could be resolved.

Transcribed Image Text:

Land and Plant and Motor Railway Buildings Machinery Vehicles Trucks Total Cost Jan. 1, 2020 100,000 875,000 1,500,000 2,475,000 Additions 10,000 125,000 525,000 995,000 1,655,000 Disposals (325,000) (100,000) (425,000) 900,000 Dec. 31, 2020 110,000 1,700,000 995,000 3,705,000 Depreciation Jan. 1, 2020 60,000 550,000 750,000 1,360,000 806,200 Charge 2,200 180,000 425,000 199,000 Disposals (120,000) (325,000) (445,000) 199,000 Dec. 31, 2020 Net book value 62,200 610,000 850,000 1,721,200 850,000 Dec. 31, 2020 47,800 290,000 796,000 1,983,800 Net book value Dec. 31, 2019 750,000 40,000 325,000 1,115,000