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Can somebody help me on this question with full explanations?
Cosmos has provided you with the following financial statement extracts on 1 April 2010 pertaining to the property, plant and equipment of the company.
Statement of Financial Position (extracts) $’000
PPE = 14,800
Less: Acc. Dep. = (3,600)
NBV = 11,200Non-Current Liabilities
Gov. grant = 3,000Current Liabilities
Gov. grant = 240The following transactions occur during the year:
i. During the year ended 31 March 2011, Cosmos disposed off a plant with a carrying amount of $200,000. The plant cost $800,000 and was acquired on 1 April 2006. The plant has a useful life of 5 years. It was disposed off for $120,000. The government requires the balance of unamortised gov. grant receives on this plant to be refunded immediately.
ii. On 1 January 2011, Cosmos acquires a new plant cost them $2 million. This plant has a useful life of 5 years with residual value of $200,000. The government grant on the purchased of this plant has been received by year end.
iii. There is a need to transfer $1 million of the gov. grant from NCL to CL.
iv. Gov. grant receipts is 25% of the asset.
Show the financial statement extracts for the year ended 31 March 2011.
Ur first step is to do part 1 and 2 first (PPE) by using IAS 16, cal the profit/loss on disposal, take note of the dates! dep them accordingly…
Then u cal the govt grant, the b/f figure will be gov grant under current liabilities,
from then on find figures that will be charged to SOCI and SFP…oh well i cant find the way to dep the other plants…frm 2010-2011,
is there any additional info regarding this issue or is there other ways to solve it?- Topics: 0
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i will try and let u know
Hi
Your figures don’t make sense – unless I’m missing something. Please check the question again and see if there is any other information about either the grant, the make up of the brought forward grant liability figures or indeed anything else which could be relevant
Everything can be calculated…
just short of the way to dep remaining assets after disposal~What’s the question reference – is it a past exam question? Is it included in a BPP revision kit? Or a kaplan Study Text?
Please direct me to the question, then I can check it for myself
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Is the balance sheet is the question the opening balance sheet?
You need to account for the following:
1) The liability for the repayment of the grant (25% of 200k)
2) The depreciation of assets acquired = (cost-residual value)/uel
3) The transfer of grant from NCLs to CLs (which seems strange!)These should all be straighforward for somebody who has studied these topics. Why don’t you post an answer and let the forum members tell you whether you are correct?
Ok, If nobody wants to answer let’s discuss my version.
Firstly we have to do some working:w1 Old Plant (Asume that we use straight line method for depreciation)
Cost of old plant = Cost of acqn(800) + disposal cost
Cost of old plant – depreciation = NBV(200) =>
(800+disp.cost) – (800+disp. cost)/5(EUL)*4 years = 200 =>
disposal cost = 200 => Cost of old plant = 800+200=1,000w2 Depreciation
Dep’n of new plant =(2,000-200-2,000*25%(grant))/5= 280 per year but it was acquired on 1.01.11 thus this year dep’n = 280/12*3=70So,
PPE = 14,800-1000(w1)+2,000(new plant)-2,000*25%(grant)=15,400
Acc. Dep. = 3,600+200(dep’n of an old plant)-1,000(disposal of an old plant)+70(w2)=(2,870)
NCL=3,000-1,000(to CL)+400(new grant)=2,400
CL=240-240(payed)+1,000=1,000These are my thoughts, I’m waiting for your corrections
p.s. I don’t understend how to use : “The government requires the balance of unamortised gov. grant receives on this plant to be refunded immediately.”
That means that any grant not yet “belonging” to the company must be repaid – now
I have found the solution from my lecturer. He said it is one of the past year questions although he did not mention which one. Thanks everyone for the kind reply.
Loss on disposal = 200,000 – 120,000 = 80,000
Total gov. grant for the disposed plant = 25% x 800,000 = 200,000
Unamortised gov. grant received = 200,000/5 = 40,000Total gov. grant for the new plant = 25% x 2,000,000 = 500,000
Gov. grant during the year (CL) = (500,000/5) x 3/12 months = 25,000
Gov. grant for the next 12 months (CL) = 100,000
Gov. grant for more than 1 year (NCL) = 375,000Depreciation for the year = (2,000,000 – 200,000)/5 x 3/12 months = 90,000
Then open T account
NCL
Debit side:
To CL 1,000,000
Bal. c/d 2,375,000
Total 3,375,000Credit side:
Bal. b/d 3,000,000
Bank 375,000
Total 3,375,000CL
Debit side:
Bank (Disposed plant) 40,000
SOCI (240,000-40,000+25,000) 225,000 **
Bal. c/d 1,100,000
Total 1,365,000**The tricky part is here. It is the amount to be actually shown in the SOCI. So we minus the refunded gov. grant (disposed plant) and plus the gov. grant received during the year(new plant).
Credit side:
Bal. b/d 240,000 (to be included in SOCI during the year end 31 March 2011)
From NCL 1,000,000
Bank 125,000
Total 1,365,000
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