Question: Rooney has recently finished building a new item of plant for its own use. The item is a press for use in the manufacture of industrial diamonds. Rooney commenced construction of the asset on 1" April 2013 and completed it on 1" April 2015. The cost of manufacturing the asset were Rs. 30,800,000. The cost of the hydraulic system is 30% of the total cost of manufacture. The press comprises two significant parts, the hydraulic system and the 'frame'. The hydraulic system has a three-year life and the 'frame' has an eight-year life. Rooney depreciates plant on a straight line basis. Rooney uses the IAS 16 revaluation model in accounting for diamond presses and revalue these assets on an annual basis. Revaluation surpluses or deficits are apportioned between the hydraulic system and the 'frame' on the basis of their year-end book values before the revaluation. Required: Explain the IAS 16 rules on accounting for significant parts of property, plant and equipment and show the accounting treatment of the diamond press in the financial statements for the financial years ending: intomen (i) 31st March 2016 (assume that the press has a fair value of Rs. 21 million) (1f) 31st March 2017 (assume that the press has a fair value of Rs. 19.6 million).
Question: Rooney has recently finished building a new item of plant for its own use. The item is a press for use in the manufacture of industrial diamonds. Rooney commenced construction of the asset on 1" April 2013 and completed it on 1" April 2015. The cost of manufacturing the asset were Rs. 30,800,000. The cost of the hydraulic system is 30% of the total cost of manufacture. The press comprises two significant parts, the hydraulic system and the 'frame'. The hydraulic system has a three-year life and the 'frame' has an eight-year life. Rooney depreciates plant on a straight line basis. Rooney uses the IAS 16 revaluation model in accounting for diamond presses and revalue these assets on an annual basis. Revaluation surpluses or deficits are apportioned between the hydraulic system and the 'frame' on the basis of their year-end book values before the revaluation. Required: Explain the IAS 16 rules on accounting for significant parts of property, plant and equipment and show the accounting treatment of the diamond press in the financial statements for the financial years ending: intomen (i) 31st March 2016 (assume that the press has a fair value of Rs. 21 million) (1f) 31st March 2017 (assume that the press has a fair value of Rs. 19.6 million).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Question: Rooney has recently finished building a new item of plant for its own use. The item is a
press for use in the manufacture of industrial diamonds. Rooney commenced construction of the
asset on 1 April 2013 and completed it on 1
Rs. 30,800,000. The cost of the hydraulic system is 30% of the total cost of manufacture.
The press comprises two significant parts, the hydraulic system and the 'frame'. The hydraulic system
has a three-year life and the 'frame' has an eight-year life. Rooney depreciates plant on a straight
April 2015. The cost of manufacturing the asset were
line basis.
Rooney uses the IAS 16 revaluation model in accounting for diamond presses and revalue these
assets on an annual basis.
Revaluation surpluses or deficits are apportioned between the hydraulic system and the 'frame' on
the basis of their year-end book values before the revaluation.
Required:
Explain the IAS 16 rules on accounting for significant parts of property, plant and equipment and
show the accounting treatment of the diamond press in the financial statements for the financial
years ending:
(1) 31st March 2016 (assume that the press has a fair value of Rs. 21 million)
(ii) 31st March 2017 (assume that the press has a fair value of Rs. 19.6 million).
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