B Co acquired a non-current asset on 1 January 2007 for $80,000.

It had no residual value and a useful

An asset was purchased for $100,000 on 1 January 2015 and straight- line depreciation of $20,000 pa is
being charged (five-year life, no residual value). The annual review of asset lives is undertaken and for
this particular asset, the remaining useful life as at 1 January 2017 is eight years. The financial
statements for the year ended 31 December 2017 are being prepared.
What is the depreciation charge for the year ended 31 December 2017?

Binkie Co has an item of land carried in its books at $13,000. Two years ago a slump in land values led
the company to reduce the carrying value from $15,000. This was taken as an expense in profit or loss.
There has been a surge in land prices in the current year, however, and the land is now worth $20,000.
Required: Account for the revaluation in the current year.
Crinckle Co bought an asset for $10,000 at the beginning of 20X6. It had a useful life of five years. On 1
January 20X8 the asset was revalued to $12,000. The expected useful life has remained unchanged (ie
three years remain).
Required: Account for the revaluation and state the treatment for depreciation from 20X8 onwards.

On 1 April 20X8 the fair value of Xu's property was $100,000 with a remaining life of 20 years. Xu’s policy
is to revalue its property at each year end. At 31 March 20X9 the property was valued at $86,000. The
balance on the revaluation surplus at 1 April 20X8 was $20,000 which relates entirely to the property. Xu
does not make a transfer to realised profit in respect of excess depreciation.
Required:
1. Prepare extracts of Xu's financial statements for the year ended 31 March 20X9 reflecting the above
information.
2. State how the accounting would be different if the opening revaluation surplus did not exist.

An entity revalued its land and buildings at the start of the year to $10 million ($4 million for the land).
The property cost $5 million ($1 million for the land) ten years prior to the revaluation. The total
expected useful life of 50 years is unchanged. The entity's policy is to make an annual transfer of realised
amounts to retained earnings.
Required: Show the effects of the above on the financial statements for the year
Derek purchased a property costing $750,000 on 1 January 20X4 with a useful economic life of 10 years.
It has no residual value. At 31 December 20X4 the property was valued at $810,000 resulting in a gain on
revaluation being recorded in other comprehensive income of $135,000. There was no change to its
useful life. Derek does not make a transfer to realised profits in respect of excess depreciation on
revalued assets. On 31 December 20X6 the property was sold for $900,000.
Required: How should the disposal on the previously revalued asset be treated in the financial
statements for the year ended 31 December 20X6?

An entity is given $300,000 on 1 January 20X1 to keep staff employed within a deprived area. The entity
must not make redundancies for the next three years, or the grant will need to be repaid. By 31
December, 20X1, no redundancies have taken place and none are planned.
The grant should be released over three years, meaning that $100,000 is taken to the statement of
profit or loss each year.
This can be shown as a separate line in the statement of profit or loss or deducted from administrative
expenses (or wherever the staff costs are charged).
As $100,000 has been released to the statement of profit or loss, the remaining $200,000 will be held in
deferred income, to be recognised over the next two years.
Of this, $100,000 will be released within the next year, so will be held within current liabilities. The
remaining $100,000 will be held as a non- current liability.
An entity opens a new factory and receives a government grant of $15,000 in respect of capital
equipment costing $100,000. It depreciates all plant and machinery at 20% pa straight-line.
Show the statement of profit or loss and statement of financial position extracts in respect of the
grant in the first year under both methods.

On 1 January 20X6 Stremans Co borrowed $1.5m to finance the production of two assets, both of which
were expected to take a year to build. Work started during 20X6. The loan facility was drawn down and
incurred on 1 January 20X6, and was utilised as follows, with the remaining funds invested temporarily.
Asset A Asset B
$'000 $'000
1 January 20X6 250 500
1 July 20X6 250 500
The loan rate was 9% and Stremans Co can invest surplus funds at 7%.
Required: Calculate the borrowing costs which may be capitalised for each of the assets and
consequently the cost of each asset as at 31 December 20X6.

Grimtown took out a $10 million 6% loan on 1 January 20X1 to build a new football stadium. Not all of
the funds were immediately required so $2 million was invested in 3% bonds until 30 June 20X1.
Construction of the stadium began on 1 February 20X1 and was completed on 31 December 20X1.
Required: Calculate the amount of interest to be capitalised in respect of the football stadium as at 31
December 20X1
Acruni Co had the following loans in place at the beginning and end of 20X6.
1 January 20X6 31 December 20X6
$m $m
10% Bank loan repayable 20X8 120 120
9.5% Bank loan repayable 20X9 80 80
8.9% debenture repayable 20X7 – 150
The 8.9% debenture was issued to fund the construction of a qualifying asset (a piece of mining
equipment), construction of which began on 1 July 20X6.
On 1 January 20X6, Acruni Co began construction of a qualifying asset, a piece of machinery for a
hydroelectric plant, using existing borrowings. Expenditure drawn down for the construction was: $30m
on 1 January 20X6, $20m on 1 October 20X6.
Required: Calculate the borrowing costs that can be capitalised for the hydro-electric plant machine

On 1 January 20X5, an entity began to construct a supermarket which had an estimated useful life of
40 years. It purchased the site for $25 million. The construction of the building cost $9 million and the
fixtures and fittings cost $6 million. The construction of the supermarket was completed on 30
September 20X5 and it was brought into use on 1 January 20X6.
The entity borrowed $40 million on 1 January 20X5 in order to finance this project. The loan carried
interest at 10% pa. It was repaid on 30 June 20X6.
Required: Calculate the total amount to be included at cost in property, plant and equipment in
respect of the development at 31 December 20X5.
Celine, a manufacturing entity, purchases a property for $1 million on 1 January 20X1 for its investment
potential. The land element of the cost is believed to be $400,000, and the buildings element is
expected to have a useful life of 50 years. At 31 December 20X1, local property indices suggest that the
fair value of the property has risen to $1.1 million.
Required: Show how the property would be presented in the financial statements as at 31 December
20X1 if Celine adopts:
(a) the cost model
(b) the fair value model.