Lusaka Rock buster has recently purchased an item of earth moving plant at a total cost of K24 million. The plant has an estimated life of 10 years with no residual value, however its engine will need replacing after every 5,000 hours of use at an estimated cost of K7.5 million. The directors of Lusaka Rock buster intend to depreciate the plant at K2-4 million (K24 million/10 years) per annum and make a provision of K1, 500 (K7-5 million/5,000 hours) per hour of use for the replacement of the engine. Required: Explain how the plant should be treated in accordance with International Accounting Standards and comment on the Directors' proposed treatment.

Lusaka Rock buster has recently purchased an item of earth moving plant at a total cost of K24 million. The plant has an estimated life of 10 years with no residual value, however its engine will need replacing after every 5,000 hours of use at an estimated cost of K7.5 million. The directors of Lusaka Rock buster intend to depreciate the plant at K2-4 million (K24 million/10 years) per annum and make a provision of K1, 500 (K7-5 million/5,000 hours) per hour of use for the replacement of the engine. Required: Explain how the plant should be treated in accordance with International Accounting Standards and comment on the Directors' proposed treatment.

Name: Lusaka Rock buster has recently purchased an item of earth moving pla
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Description: Lusaka Rock buster has recently purchased an item of earth moving plant at a total cost of K24million. The plant has an estimated life of 10 years with no residual value, however its enginewill need replacing after every 5,000 hours of use at an est

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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