Question

Question 1

Trial balance extracts at 30 September 2019
$’000

Land at cost on 30 September 2018 50,000
Plant and equipment at cost 76,600
Accumulated depreciation at 30 September 2018
Plant 24,600
Capitalised development expenditure at 30 September 2018 20,000
Non-current assets – tangible:
The land was acquired on the 30 September 2018.

The company’s policy is to revalue its land at each year

end and at 30 September 2019 it was valued at $53 million.

On 1 October 2018 an item of plant was disposed of for $2.5 million cash.

The proceeds have been treated
as sales revenue by the business.
The plant is still included in the above trial balance figures at its cost of
$8 million and accumulated depreciation of $4 million (to the date of disposal).

All plant is depreciated at 20% per annum using the reducing balance method.
Depreciation and amortisation of all non-current assets is charged to cost of sales.
Non-current assets – intangible:
In addition to the capitalised development expenditure (of $20 million), further research and
development costs were incurred on a new project which commenced on 1 October 2018. The research
stage of the new project lasted until 31 December 2018 and incurred $1.4 million of costs. From that date
the project incurred development costs of $800,000 per month. On 1 April 2019 the directors became
confident that the project would be successful and yield a profit well in excess of its costs. The project is
still in development at 30 September 2019.
Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All
expensed research and development are charged to cost of sales.

Requirements:

1. Calculate the revaluation gain amount from the land.

2. Calculate the depreciation amount on the plant sold.

3. What is the profit or loss on disposal amount?

4. Calculate the depreciation expenses for the current financial year.

5. Calculate the accumulated amortization on the capitalised development cost to date.

6. The development cost capitalised has a useful life of how many years?

7. Calculate the total incurred research and development expenses as per IAS 38 for the current year.

8. What's the total research cost amount for the period?

9. What is the total development cost amount for the period?

10. Calculate the carrying amount of the plant and equipment at the beginning of the period.

11. What is the accumulated depreciation amount on plant and equipment at the end of the period?

12. Revaluation Gain is a revenue item as per the requirement of IAS 16 (true/ false)?

13. For property measured using the cost model, it is possible to use measurement model for a certain class of property, plant and equipment and another measurement model for another class of property, plant and equipment (true or false)?

Answer 1

1) Revaluation gain Land :-

Cost of Land 5,00,00,000 $

Revalued amount 5,30,00,000 $

Revaoluation gain 30,00,000 $

2) Depreciation on plan sold = (8,00,00,000-4,00,00,000)*20% = 800,000 $

3) Profit or loss on Sold Plan =

cost	80,00,000$
Less Accumulated deppreciation	40,00,000$
Less Sold	25,00,000$
Loss on sale of Plant	15,00,000$

4) Depreciation are as under:-

Particular	Total Plan	Sold	Net Plan
Cost	7,66,00,000	80,00,000	6,86,00,000
Acc Dep	2,46,00,000	40,00,000	2,06,00,000
Net Block	5,20,00,000	40,00,000	4,80,00,000
Deprecuation on Net Plan	(4,80,00,000*20%)		96,00,000

5) Accumlated amortisation of cpitalised developmet cost = (2,00,00,000*20%) = 40,00,000 $

6) Capital development cost have a life of 5 years:-

7) Research expenditure :- 38,00,000 $ Development expenditure :- 48,00,000 $

8) Research cost :- 14,00,000 $

9) Development cost :- 72,00,000 $

10) Carrying amount of Plan & building = 4,80,00,000 $

11) Accumulated depreciation at the end of the period = (2,06,00,000 + 96,00,000) = 3,02,00,000 $

12) No its retained earning item

13) False becasue the model should be used for the entire class.