You are appointed as accounts executive in Pak Fans Pvt. Ltd. On the first day of your
Question:
You are appointed as accounts executive in Pak Fans Pvt. Ltd. On the first day of your job; you are told that company bought machinery on 01 July 2017 for PKR 2,400,000 from China. The delivery and freight cost of plant to bring the plant in Pakistan was PKR 500,000. Further PKR 500,000 was spent on freight to bring and assemble plant in industrial area Islamabad. You are also told that the cost of trial production was PKR 100,000 which was not required when plant was assembled. A special kind of license is also required to from environmental departmental annually. The fees of license are PKR 100,000. At the time of assembly of plant, local engineers painted the plant with special fluorescent color which cost further PKR 100,000 and management believed it was required at the time of assembly. At that time, the management decided that plant will have a useful life of 5 years and machinery then can be disposed of for PKR 500,000. Pro rata, reducing balance policy is adopted for all kind of capital expenditures. Required:
1. Write the capital expenditure measurement and recognition for the year ended 31 Dec 2017.
(2 Marks)
2. Calculate depreciation charge, carrying values for first three years of acquisition also show the T- accounts of accumulated depreciation account, machinery account and depreciation expense account for first three years.(Till year ended Dec 2019) (6 Marks)
3. On 01 June 2020, the management decided to dispose of the machinery for 1,200,000. Prepare relevant accounts related to disposal of machinery and calculate the figures to be reported in Statement of profit and Loss for year ended 31 Dec 2020.
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac