In need of Solutions to the following questions on Property Plant and equipment

1. Herring plc has the following non-current assets at 1 April 20×8.

Cost #’000 Depreciation #’000 Net Book Value #’000
Freehold Factory 1,440 144 1,296
Plant and Equipment 1,968 257 1,711
Motor Vehicles 449 194 255
Office Equipment and Fixtures888 583 305
Total 4745 1,178 3,567

You are given the following information for the year ended 31 March 20×9:
(i) The factory was acquired in June 20×4 and is being depreciated over 50 years.
(ii) ` Depreciation is provided on cost on a straight-line basis. The rates used are 20% for fixtures and fittings, 25% for motor vehicles and 10% for plant and equipment.
(iii) During the year the factory was revalued to an open market value of N2.2 million and an extension was built costing N500,000. Plant and fixtures for the factory extension cost N75,000 and £22,000 respectively.
(iv) The directors decided to change the method of depreciating motor vehicles to 30% reducing balance to give a fairer presentation of the results and of the financial position.
(v) Two cars costing N17,500 each were bought in May.
(vi) When reviewing the expected lives of its non-current assets the directors felt that it was necessary to reduce the remaining life of a two-year-old grinding machine to four years when it will be sold for N8,000 as scrap. The machine originally cost N298,000 and at 1 April 20×8 had related accumulated depreciation of N58,000.
(vii) It is the company’s policy to charge a full year’s depreciation in the year of acquisition.

REQUIRED
Prepare the disclosure notes for PPE for the year ended 20×8 in a form suitable for
publication in a set of company accounts.

2. Jospin plc has the following plant, property and equipment at 1 April 2005:

Cost #’000 Accumulated Depreciation #’000 Net Book Value #’000
Freehold Factory 4,000 600 3,400
Plant and Machinery 1,224 440 784
Fixtures and Fittings 2,426 1,080 1,346
Total 7,650 2,120 5,530

You are given the following information for the year ended 31 March 2006:

i. Depreciation is provided on cost on a straight-line basis. The rates used are 2% for
freehold buildings, 20% for plant and machinery and 10% for fixtures and fittings.
ii. It is the company’s policy to charge a full year’s depreciation in the year of
acquisition, and none during the year of disposal.
iii. On 1 April 2005 the factory was revalued to N6,000,000 (buildings N4,400,000 and
land N1,600,000). It had been purchased on 1 April 1995.
iv. Major repairs were carried out to a machine costing N30,000. This included a new
filter costing N10,000 which increased the efficiency of the equipment by 50%.
v. Fixtures and fittings costing N480,000 on 1 June 2000 were sold for N440,000.
vi. A new machine was purchased for N140,000 plus installation costs of N10,000
vii. Fixture and fittings were purchase for N50,000 plus delivery costs of N4,000 and a
N2,000 warranty against mechanical defects for three years.

viii. On 1 April 2005, when reviewing the expected lives of its PPE, the directors
decided that due to changes in technology it was desirable to reduce the remaining life
of a machine purchased on 1 April 2004 to two years. It would then be scrapped with
an expected nil residual value. The original cost of the machine was N764,000.
REQUIRED:
(a) Prepare a schedule of PPE movements and balances (i.e. reconciling opening balances with closing balances) suitable for inclusion in the company’s published accounts for the year ended 31 March 2006.
(b) A company has the following accounting policy:
‘Freehold and long leasehold properties are maintained to a standard that preserves
likely residual values at a level at least equal to total book values. Accordingly, no
provision has been made for depreciation as the amount involved would not be
material.’
Evaluate this policy against the requirements of IAS 16 and IAS 36.