PPE

Question 1

PPE

Answer 1

Property plant and equipment are tangible items that:

Held for use in the production of income, rental to others or administrative purposes AND

Expected to be used for more than one period

Question 2

cost price of a non-current asset

Answer 2

COST PRICE AND ANY DIRECT COSTS INCURRED TO BRING THE ASSET to WORKING CONDITION FOR ITS INTENDED USE

Question 3

depreciation

Answer 3

Apportionment of the depreciable amount of a depreciable asset over its estimated useful life

Question 4

why do we depreciate assets

Answer 4

Ensure fair presentation of the financial statements

Question 5

residual value

Answer 5

amount expected
at the sale/trade-in of the asset
at the end of its useful life
after deduction of estimated sale and trade-in costs
(this amount is NOT recorded separately on the balance sheet)

Question 6

function of accumulated depreciation account

Answer 6

Convenience account used to keep depreciation separate from cost price of an asset

On the B/S Accumulated depreciation is deducted from cost price to show asset at carrying amount
Carrying Amount = Cost price – Accumulated Depreciation

Question 7

function of the fixed asset register

Answer 7

Summary of all assets owned by the entity
 Includes information regarding cost price, residual value and depreciation method per asset
 Total of fixed asset register goes to Financial statements

Question 8

do you derecognise an asset when it is fully depreciated

Answer 8

no, not necessarily

Question 9

when do you derecognise an asset and at what value?

Answer 9

sell/trade in
No future economic benefits expected from its use (when it is irreparably damaged)

derecognise at carrying value (value at time of disposal rather than purchase price)