The accountant has started the PPE and Depreciation Schedule for the year ended September 30, 2023. At Island Solutions, the depreciation policy is to apply one month’s ownership, one month’s depreciation. Your team was provided with the following information. • Land and Building were acquired for $800 000 in a lump sum purchase. At the time of acquisition, the appraised values of the land and building were $90 000 and $810 000 respectively . • Equipment with an appraised value and residual value of $40 000 and $3 000 respectively was received by the company as a donation. • Machinery costing $182 900 inclusive of $600 installation expense and $14 900 normal repair and maintenance cost, and with a $6 000 estimated salvage value was sold on February 1, 2023. 1. Explain three (3) similarities and two (2) differences between IFRS and US GAAP with respect to accounting for property, plant and equipment. 2. Complete the PPE and Depreciation Schedule below by providing the values for [a] – [j]. Show all workings. Assets Date of Acquisition Cost Residual Value Depreciation Method Estimated Useful Life (years) Annual Depreciation Expense September 30 2022 2023 Land Oct 1, 2021 A - - - - - Building Oct 1, 2021 B $40,000 SLM C $13,600 D Equipment Oct 1, 2021 E 3,00000 150% declining balance 10 F G Machinery Oct 1, 2021 H 6,000 SYD
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The accountant has started the PPE and
• Land and Building were acquired for $800 000 in a lump sum purchase. At the time of acquisition, the appraised values of the land and building were $90 000 and $810 000 respectively
. • Equipment with an appraised value and residual value of $40 000 and $3 000 respectively was received by the company as a donation.
• Machinery costing $182 900 inclusive of $600 installation expense and $14 900 normal repair and maintenance cost, and with a $6 000 estimated salvage value was sold on February 1, 2023.
1. Explain three (3) similarities and two (2) differences between IFRS and US GAAP with respect to accounting for property, plant and equipment.
2. Complete the PPE and Depreciation Schedule below by providing the values for [a] – [j]. Show all workings.
|
Assets |
Date of Acquisition |
Cost |
Residual Value |
Depreciation Method |
Estimated Useful Life (years) |
Annual Depreciation Expense September 30 |
|
|
2022 |
2023 |
||||||
|
Land |
Oct 1, 2021 |
A |
- |
- |
- |
- |
- |
|
Building |
Oct 1, 2021 |
B |
$40,000 |
SLM |
C |
$13,600 |
D |
|
Equipment |
Oct 1, 2021 |
E |
3,00000 |
150% declining balance |
10 |
F |
G |
|
Machinery |
Oct 1, 2021 |
H |
6,000 |
SYD |
8 |
I |
J |
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