Semester “Spring 2012” “Financial Accounting II (MGT401)”
Assignment No. 01 Total Marks: 20
Classic Plants International (CPI) acquired a highly sophisticated used plant from Europe on January 1, 1990, at an invoice price of Rs. 40,000. The other costs associated with this purchase were:
Rs. Freight charges 2, 500 Misc. expenses paid for the import of machinery 3, 500 Site preparation 4, 000 Cost of test run & special staff training 5, 000
The plant with economic life of 15 years was expected to have a useful life of 10 years. CPI has the policy to charge the depreciation under straight line method. The plant was revaluated by an independent Valuer on January 1, 1993 at appraised gross replacement cost of Rs.70, 000. You are required to: 5*4 marks= 20
1. Draw the criteria under IAS – 16 to capitalize each of the above cost associated with this plant. Also find the total amount of plant to be capitalized in this regard.
2. Describe and show the impact of revaluation of the plant under alternate method of IAS – 16.
3. Describe and show the impact of revaluation by passing a journal entry.
4. If this plant is replaced with the similar class of asset costing Rs. 70,000 at the end of 4th year, then what will be the treatment of this plant under IAS 16?
5. Note down the treatment of “Surplus on Revaluation of Fixed Assets” as described by IAS – 16.
Solution of Assignment No. 1
Solution 1. Cost of plant: Rs. Cost price 40, 000 Cost of test run 5, 000 Site preparation 4, 000 Import duties 3, 500 Freight charges 2, 500 55, 000 2. Revaluation adjustment under Alternate treatment of IAS 16:
This week’s lesson is regarding intellectual property rights. Intellectual property rights according to "Merriam-Webster Dictionary" (n.d.) is, “ Property (as an idea, invention, or process) that derives from the work of the mind or intellect; also : an application, right, or registration relating to this.” It is important for a business owner to know about intellectual property, because it drives economic growth, creates and supports high-paying jobs, helps generate solutions to global challenges, encourages and rewards entrepreneurs, and protects consumers and their families. This week the team discussed their businesses and intellectual property rights. Some of the common and unique issues industries face are: • How would you protect your intellectual property rights? • How would you ensure that you do not violate intellectual property rights of others? • How does the Internet increase the scope of these violations? • Why is ethical conduct important in respecting the intellectual property rights of others? Intellectual property rights are rights that is had by a person or by a company to have exclusive rights to use its own plans, ideas, other intangible assets without the w orry of competition. The