Solution 1 (Apricot Pakistan Limited) Rs.

in million
Book value 610
Recoverable amount is higher of:
Fair value less cost to sell (570 - 45 - 10) 515
Value in use (W-1) 537 537
Impairment loss 73
Depreciation expense for the year ended 30.6.19 [(537 - 100) / 3] 146

Notes
Costs to re-organize the production process after disposal of plant is not a cost to sell

W-1 Value in use 30.6.2019 30.6.2020 30.6.2021

Inflows from sale of product 250
Operational cost (25)
Depreciation -
Payment of 2018 accruals -
Cost of increasing capacity -
Additional inflows of upgrade -
Interest on finance lease -
Maintenance cost (15)
Tax payment on profits -
Sale proceeds after 3 years - - 100
Net cash flows 210 179 252
PV factor @ 9% 0.917 0.841 0.772
Present value (Value in use) 193 150 194 537

Solution 2(MCQS)
1. c&d
2. d
3. c
Solution 3
Ninja Enterprises
Rent expense – 2016 (2 Marks)
Date Description Rs. in '000 Date Description Rs. in '000
1-Apr-16 Cash - B1 1,200 31-Dec-16 Expense - P&L – B1 1,800
1-Sep-16 Cash - B2 225 31-Dec-16 Expense - P&L – B2 300
1-Oct-16 Cash - B1 1,200 31-Dec-16 Closing prepaid– B1 600
(1,200/6×3)
1-Dec-16 Cash - B2 225 31-Dec-16 Closing prepaid– B2 150
(225/3×2)
2,850 2,850
 Rent expense – 2017 (3 Marks)
Date Description Rs. in '000 Date Description Rs. in '000

1-Jan-17 Opening prepaid - B1 600 31-Dec- Expense - P&L – B1 2,520

17
1-Jan-17 Opening prepaid - B2 150 31-Dec- Expense - P&L – B2 900
17
1-Mar-17 Cash - B2 225 31-Dec- Closing prepaid – 720
17 B1(1,440/6×3)
1-Apr-17 Cash - B1 1,200
1-Jun-17 Cash - B2 225
1-Sep-17 Cash - B2 225
1-Oct-17 Cash - 1,440
B1(1,200×1.2%)
31-Dec- Closing accrued -
17 B2(225/3×1)
75
4,140 4,140
SOLUTION 4
Impairment test (as on 31-12-2021)
Rs. In million
(1) Book value (W-1) 58
(2) Recoverable amount is higher of: 53
Fair value – CTS 48
V.I.U (W-02) 53
(3) Impairment loss (Balance) 5

Working -1:
Date Description Plant
1-1-18 Cost (130 + 10) 140
31-12-18 Depreciation (140 x 20%) (28)
31-12-19 Depreciation (112 x 20%) (22)
Balance value 90
31-12-20 Depreciation (18)
Balance value 72
31-12-21 Depreciation (14)
31-12-21 Balance value 58
31-12-22 Depreciation (58 x 20%) (12)
Balance value 46
31-12-23 Depreciation (9)
Balance value 37
31-12-24 Depreciation (7)
Balance value 30
31-12-24 Depreciation (6)
Balance value 24
Working -2
value in use

22 23 24 25
Net cash inflows 11 7 3 1
Add: Depreciation 12 9 7 6
Add: Tax payment 2 2 2 2
Less: Inventory (3)
Add: Net depreciation process 4
Net cash flows (A) 22 18 12 13
PV factor (B) 1.1-1 1.1-2 1.1-3 1.1-4
PV (A x B) (20+15+9+9) 20 15 9 9 53

SOLUTION 5
Manther Limited
Notes to the financial statement
For the year ended 31 December 2018
N-1: Property, plant and equipment:
Office building Equipment Plant
----------------- Rs. in million ----------------
Gross carrying amount
Opening 240.00 190.00 -
Addition - 96.00 699.25
Transfer (48) - -
Revaluation (14) - -
- Disposal - (40.00) -

Closing 178.00 246.00 699.25

- - -
Accumulated Depreciation

Opening 36.00 60.00 -

Depreciation for the year 12 30.48 7.77
Transfer (48) - -
Disposal - (15.04) -
Closing - 75.44 7.77
Net carrying amount – closing 178.00 170.56 691.48

Net carrying amount – opening 204.00 130.00 -

Office building Equipment Plant

Measurement base Revaluation Cost model Cost model
model
Useful life (years)/depreciation rate % 20 years 20% 15 years
Depreciation method Straight line Reducing Straight line
balance
N-1.1: The last revaluation was performed on 31 December 2018 by Precise Valuers, an independent firm
of valuers.
Carrying value of building, had the cost model been used instead Xxx
WORKINGS
W-1
Asset Building R/S P/L
1-1-18 Cost/Revalued Amount 240 - -
1-1-18 Acc Dep (36) - -
1-1-18 WDV 204 8.5 -
31-12-18 Dep 204/17*; 8.5/17* (12) (0.5) -
31-12-18 WDV 192 8.0 -
31-12-18 Revaluation Loss (P/L) (14) (8.0) (6.0)
31-12-18 Revalued Amount 178 - (6.0)

* Remaining life = Original life – Life passed till 31.12.17

Remaining life = 20 – 3** = 17
**Accumulated depreciation = Depreciation of one year x Life passed till 31.12.17
36 = (240 / 20) x Life passed till 31.12.17
Life passed till 31.12.17 = 3 years

W-2 Depreciation on equipment

Depreciation on Opening excluding disposal 20.24
{WDV all – WDV Disposal}Rate {130 - 28.8}20%
Depreciation on addition {960.24/12} 6.4
Depreciation on disposal
WDV opening  rate {W-3.2} 3.84
Total 30.48
W-3 Exchange of Assets – Journal Entry
Dr. Cr.
Asset-New (W.3.1) 96
Acc Dep-Old (40-24.96) (W-3.2) 15.04
Loss on Disposal 3.96
Asset-Old 40
Cash (70 + 5 installation) 75

W.3.1 Asset-New Cost

FV Old + Cash Paid 21 + 70 91
Installation cost 5
Total 96
W-3.2 Accumulated depreciation
Rs. in million
Cost 40.00
6
Depreciation 40  0.2  (4.00)
12
WDV 36.00
Depreciation (7.20)
WDV 28.80
8
Depreciation 28.8  0.2  (3.84)
12
24.96
Accumulated depreciation (40 – 24.96) 15.04
W-4 Cost of plant
Rs. in million
Payments 660.00
Borrowing cost:
Interest cost 500×18%×7.5÷12 56.25
Investment income (17.00)
699.25

W-4.1 Depreciation or plant

699.25 2
 = 7.77
15 12