You are provided with an extract from the notes to the financial statements No.
ID: 2545966 • Letter: Y
Question
You are provided with an extract from the notes to the financial statements No. 14 (Property, plant, and equipment) for BOC Kenya Limited 2016 annual report.
2016
Land & Buildings
Plant & Machinery
Motor vehicles
Cylinders
Furniture & equipment
Capital
Total
Cost
At 1 January, 2016
113,169
515,260
207,760
729,356
51,168
32,549
1,649,262
Transfers
-
-
31,482
1,067
-
(32,549)
-
Reallocation
300
-
-
-
-
-
300
Additions
-
24,362
13,329
19,373
4,837
14,830
76,731
Assets removed
-
-
(45,638)
-
-
-
(45,638)
Disposals
-
-
(1400)
(5,342)
-
-
(6,742)
At 31 Dec, 2016
113,469
539,622
205,533
744,454
56,005
14,830
1,673,913
Depreciation
At 1 Jan. 2016
(56,094)
(407,697)
(108,726)
(333,853)
(43,797)
-
(950,167
Reallocation
(300)
35,097
(35,097)
-
-
-
(300)
Charge for the year
(2,944)
(21,096)
(11,660)
(24,810)
(3,314)
-
(63,824)
Assets removed
-
-
45,638
-
-
-
45,638
Disposals
-
-
1,400
2,886
-
4,286
At 31 Dec.2016
(59,338)
(393,696)
(108,445)
(355,777)
47,111
-
964,368
Carrying value:
At 31 Dec.2016
54,131
145,925
97,088
388,677
8,894
14,830
709,545
During the year, the company received compensation of kshs 4,078,138 (2015: 568,637) from third parties for lost cylinders and disposal of replaced trucks. The net book value of the disposed assets was kshs 2,455,204.
Included in property, plant and equipment are assets with a gross value of KShs 359,440,852 (2015: KShs 342,719,812) which are fully depreciated but still in use. The notional depreciation charge on these assets would have been KShs 51,780,882 (2015: KShs 45,489,450). There were no idle assets at 31 December, 2016 and 2015.
Required;
(a) What is meant by (i) depreciation, (ii) carrying value. (iii) Capital work in progress, (iv) transfers, (v) disposals?
(b) Illustrate how the carrying values of the assets are arrived at.
(c) What were the different components of plant, property, and equipment for the year 2016?
(d) What was the depreciation expenses for motor vehicles during the year?
(e) What was the accumulated depreciation for motor vehicles as at 31 December 2016. What does this figure represent?
2016
Land & Buildings
Plant & Machinery
Motor vehicles
Cylinders
Furniture & equipment
Capital
Total
Cost
At 1 January, 2016
113,169
515,260
207,760
729,356
51,168
32,549
1,649,262
Transfers
-
-
31,482
1,067
-
(32,549)
-
Reallocation
300
-
-
-
-
-
300
Additions
-
24,362
13,329
19,373
4,837
14,830
76,731
Assets removed
-
-
(45,638)
-
-
-
(45,638)
Disposals
-
-
(1400)
(5,342)
-
-
(6,742)
At 31 Dec, 2016
113,469
539,622
205,533
744,454
56,005
14,830
1,673,913
Depreciation
At 1 Jan. 2016
(56,094)
(407,697)
(108,726)
(333,853)
(43,797)
-
(950,167
Reallocation
(300)
35,097
(35,097)
-
-
-
(300)
Charge for the year
(2,944)
(21,096)
(11,660)
(24,810)
(3,314)
-
(63,824)
Assets removed
-
-
45,638
-
-
-
45,638
Disposals
-
-
1,400
2,886
-
4,286
At 31 Dec.2016
(59,338)
(393,696)
(108,445)
(355,777)
47,111
-
964,368
Carrying value:
At 31 Dec.2016
54,131
145,925
97,088
388,677
8,894
14,830
709,545
Explanation / Answer
(a).
(i) Depreciation is the decrease in the value of the asset due to usage / lapse of time.
(ii) Carrying value is the net value of the asset as at date after reducing the depreciation on the asset.
(iii) Capital work in progress , is the expenditure incured on capital assets before they are put inot use or operation. Example for capital work in process : Construction of a new factory building, which may take more than one - year to complete. The expenditure incurred on the building each period, is capitalised as capital work-in-progress until the building is put to use.
(iv) Transfers normally involves , the tarnsfer of the value of an asset from capital work-in-progress to a specific asset group.
(v) Disposal of an asset is the removal of the asset form the aset list , due to sale or obsolescence.
(c) Components of Property,Plant and Equipment are
i. Land and buildings
ii. Plant and Machinery
iii. Motor Vehilces
iv. Furniture and fixtures.
(d) Depreciation expense for motor vehilces during the year = 11,660.
(e) Accumulated Depreciation as at December 31, 2016 = $108,445.
This figure represents the depreciation charged over the period on the motor vehicles which are in use as at Dec.31, 2016.
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