FAR 1 Pre Batch Over All Lecture Notes

CAF-01: FAR-I (Pre Batch) Over All Lecture Notes
(IAS-16)
Lecture 1 (IAS-16) Lecture 13 (overall)
Classwork:
1) Discussed Lecture 11 homework;
2) Started discussion on fixed assets and depreciation;
3) Discussed straight line method of depreciation and solved following questions in class:
Question-1
Mr. Atif has purchased a vehicle. Its cost on January 1, 2008 was Rs. 50,000. Its life is 4 years.
Calculate depreciation for 4 years using straight line method. Year end is December 31.
Question-2
Mr. Latif has purchased a plant. Its cost on 1.4.2008 was Rs. 50,000. Its life is 4 years. Calculate
depreciation expense for year ended December 31, 2008, 2009 and 2010.
Question-3
Mr. Arif has purchased a vehicle. Its cost on 1.5.2008 was Rs. 70,000. Its life is 5 years. Calculate
depreciation expense for 2008, 2009, 2010, 2011. Year end is December 31.
Question-4
Mr. Atif has purchased an asset on 1.4.2004 for Rs. 50,000. Its residual value is 10,000 and rate
of depreciation is 25% straight line. Year end is 31 December.
Required:
Calculate depreciation from 2004-2007.
Question-5
Mr. Zeeshan has purchased an asset on 1.7.2004 for Rs. 70,000. Its residual value is Rs. 20,000
and useful life is 4 years. Method used is straight line.
Required:
Calculate depreciation from 2004-2006 assuming year end is December 31.
Homework:
Classwork revision

Classwork:
1. Solved lecture 12 classwork question 1; 2 and 4;
2. Solved following question:
Mr. Babar purchased the following assets:
Date of purchase Cost
1 April 2009
st
200,000
1st June 2009 300,000
1st September 2010 500,000
Depreciation rate is 10% under straight line method.
Requirement: Prepare asset a/c and Acc. Dep a/c as on 31st December 2009 and 2010.
Homework:
1. Mr. Anjum has started the business on January 1, 2009 of trading in shoes. He has disclosed the
following data for first three years of his business operations which relates to additions in fixed assets:
Date of Purchase Cost (Rs.)
Year end December 31, 2009
Umair Sheraz Utra, ACA. Page |1

- Asset-1 1.1.2009 30,000

- Asset-2 1.7.2009 10,000
- Asset-3 1.4.2010 50,000
- Asset-4 1.7.2011 60,000
Useful life of all assets is 4 years.
Required:
Prepare an asset a/c, accumulated depreciation a/c and balance sheet extracts using above mentioned
information for first three years of operations.
2. Mr. Sultan has started the business on January 1, 2010 of trading in computers. He has disclosed the
following data for first two years of his business operations which relates to additions in fixed assets:
Date of Purchase Cost
Asset – 1 1.1.2010 30,000
Asset – 2 1.4.2010 40,000
Asset – 3 1.6.2010 50,000
Asset – 4 1.3.2011 70,000
Rate of depreciation is 25% per annum using straight line method.
Required:
Prepare asset A/c, accumulated depreciation A/c for year ended December 31, 2010, 2011, 2012.
3. Mr. Waqar has started the business on January 1, 2013 of trading in chairs. He has disclosed the
following data for first two years of his business operations which relates to additions in fixed assets:
Building – 1 1.1.2013 10,000
Building – 2 1.5.2013 15,000
Building – 3 1.8.2014 13,000
Building – 4 1.9.2014 12,000
Useful life of all assets is 6 years and method used for depreciation is straight line.
Required:
Prepare asset a/c and accumulated depreciation a/c for year ended December 31, 2013 and 2014.
Solutions
Answer-1
Dr. Asset A/c Cr.
1.1.09 b/d -
1.1.09 Cash 30,000
1.7.09 Cash 10,000 31.12.09 c/d 40,000
1.1.10 b/d 40,000
1.4.10 Cash 50,000 31.12.10 c/d 90,000
1.1.11 b/d 90,000
1.7.11 Cash 60,000 31.12.11 c/d 150,000
Dr. Accumulated Depreciation a/c Cr.
1.1.09 b/d -
31.12.09 c/d 8,750 Depreciation expense 8,750
1.1.10 b/d 8,750

1.1.11 b/d 28,125

Mr. Anjum
Balance Sheet (extracts)
As on 31st December
2009 2010 2011
Asset a/c 40,000 90,000 150,000
Less: Accumulated Depreciation (8,750) (28,125) (58,125)
31,250 61,875 91,875
WORKINGS
(W-1) Calculation of depreciation
For 2009
On additions (30,000/4) + (10,000/4  6/12) 8,750
For 2010
On opening assets (40,000/4) 10,000
On additions (50,000/4  9/12) 9,375
19,375
For 2011
On additions (60,000/4  6/12) 7,500
30,000
Answer-2
Dr. Asset A/c Cr.
1.1.10 b/d -
1.1.10 Cash 30,000
1.4.10 Cash 40,000
1.6.10 Cash 50,000 31.12.10 c/d 120,000
1.1.11 b/d 120,000
1.3.11 Cash 70,000 31.12.11 c/d 190,000
1.1.12 b/d 190,000
31.12.12 c/d 190,000

1.1.10 b/d -
1.1.11 b/d 22,292
1.1.12 b/d 66,876
Calculation of Depreciation
Depreciation for 2010
On additions (30,000  25%) + (40,000  25%  9/12) + (50,000  25%  7/12) 22,292
On opening assets (120,000  25%) 30,000
On additions (70,000  25%  10/12) 14,584

44,584
Answer-3
Dr. Building a/c Cr.
1.1.13 b/d - -
1.1.13 Cash 10,000
1.5.13 Cash 15,000 31.12.13 c/d 25,000
1.1.14 b/d 25,000
1.8.14 Cash 13,000
1.9.14 Cash 12,000 31.12.14 c/d 50,000
Dr. Accumulated Depreciation Cr.

1.1.13 b/d -
1.1.14 b/d 3,333
On additions during the year (10,000/6) + (15,000/6  8/12) 3,333

On additions during the year (13,000/6  5/12) + (12,000/6  4/12) 1,569
5,735
Classwork:
3. Solved lecture 14 classwork question and homework question 3;
Mr. Qasim purchased an asset for Rs.90 on 1st January 2010. Life is 3 years and year end
is 31st December.
Requirement: Prepare B/S extracts for 2010, 2011, 2012.
Homework:
1. Mr. Ehsan has provided the following information as on 1.1.2012 / Following balances are
appearing in the books of Ehsan as on 1.1.2012.
Asset A/C 900,000
Acc. Dep. A/C 350,000
Following additions took place during the year ended 31.12.2012
Date of Purchase Cost (Rs)
1 May 2012
st
180,000
1 August 2012
st
130,000
Rate of Dep is 20% on straight line.
Requirement: Prepare Asset and Acc. Dep. a/c as on 31st December 2012 and 2013.

2. Mr. Asif has informed you that following balances are appearing on 1.1.2009 in his books of
accounts:
Accumulated
Cost
Depreciation
Vehicles 300,000 113,000
Following is the detail of additions during the year ended December 31, 2009:
Date of Cost
Purchase
Vehicle – ACT 1.3.2009 10,000
Vehicle – MGY 1.5.2009 15,000
Rate of depreciation is 20% per annum using straight line method.
Required:
Prepare relevant accounts for year ended December 31, 2009.
Solution:
Dr. Vehicle a/c Cr.
1.1.09 b/d 300,000
1.3.09 Cash 10,000
1.5.09 Cash 15,000 31.12.09 c/d 325,000

1.1.09 b/d 113,000
On additions (10,000  20%  10/12) + (15,000  20%  8/12) 3,667
63,667
Classwork:
5. Solved lecture 15 homework question 1 (Mr. Ehsan);
6. Disposal of fixed assets under straight line method.
Q.1 Following Account Balances are appearing on 1.1.18:
Asset A/C 300,000
Acc. Dep 120,000
Details of additions:
1.March.2018 30,000
1.June.2018 50,000
Details of disposals:
Date of Purchase Date of sale Cost Sale Proceeds
1.October.2015 30.June.2018 40,000 12,000
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31st December 2018. Rate
of depreciation is 10% S.L method
Q.2 Following Balances are appearing on 1.1.2017:

Asset A/C 50,000

Acc. Dep A/C 20,000
Additions of Rs. 30,000 took place on 1 September 2017. Further an asset costing Rs.
st
25,000 which was purchased on 1st July 2015 is disposed off on 30th September 2017 for Rs.
3,000 only. Rate of depreciation is 20% S.L method.
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31st December, 2017.
Homework:
1. Mr. Black has provided you with following information:
Accumulated
Cost as on Rate
Depreciation
1.1.2001 as on 1.1.2001 S.L
Plant and Machinery 600,000 200,000 20%
Furniture 700,000 130,000 10%
Vehicle 800,000 170,000 25%
Following are the additions made in year ended December 31, 2001.
Date Cost
Plant and Machinery 1.1.2001 60,000
Furniture 1.6.2001 80,000
Vehicle 1.9.2001 70,000
Required:
Prepare Assets Accounts and Accumulated Depreciation account for year ended December 31, 2001
only.
2. The following detail is provided by Mr. Aamir on 1.1.2007

Accumulated
Cost as on
Depreciation as on
01.01.07
01.01.07
Vehicle 1,400,000 650,000
Rate of depreciation is 15% on straight line basis
Following is the further detail for year ended December 31, 2007
Additions
1.Mar.07 200,000
1.May.07 250,000
1.June.07 23,000
Disposals
Description Date of Purchase Date of Disposal Cost Sale proceeds

Vehicle – 1 1.July.05 31.Mar.07 40,000 2,300
Vehicle – 2 1.March.04 30.June.07 70,000 4,700
Vehicle – 3 1.Aug.06 30.Nov.07 90,000 6,600
Required:

3. A company maintains its fixed assets at cost. Accumulated provision for depreciation accounts are
kept for each asset.
At 31 December 20X8 the position was as follows:
Total Cost To Date Total Depreciation To Date
Rs. Rs.
Machinery 52,950 28,350
Office furniture 2,860 1,490
The following transactions were made in the year ended 31 December 20X9:
(a) Purchased - machinery Rs. 2,480 and office furniture Rs. 320 both on 1 March 20X9
(b) Sold machinery for Rs. 800 on 31 January 20X9 which had cost Rs. 2,800 when purchased on
1 December 20X5.
Depreciation is charged, on a straight line basis, at 10% on machinery and at 5% on office furniture.
Required:
Show the asset and accumulated provision for depreciation accounts for the year 31 December 20X9.
Classwork:
Disposal of fixed assets under straight line method.
7. Solved lecture 16 classwork question 2;
8. Solved following questions:
Q.1 Following balances are appearing on 1.1.13.
Asset A/C 70,000
Acc. Dep A/C 20,000
Additions:
Date Cost
1.Mar.2013 10,000
Disposals:
D.O.P D.O.S Cost Sale Proceeds
1.Apr.09 30.Jun.13 5,000 1,000
1.Jul.10 30.Sep.13 2,000 500
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31.12.13 and 14 along-
with journal entries for disposals. Also prepare financial statements extracts. Rate is
10% S.L.
Reducing balance method
Q.2 Mr. Saim purchased an asset costing Rs. 200,000 on 1st Jan, 2019. The asset has a
residual value of Rs. 19,850 at the end of its useful life. The asset is depreciated under
Reducing Balance Method at 37%. Compute depreciation for the year ended 31st
December, 2019 to 31st December, 2023.
Q.3 Assume the data is same as in question-vi above but the asset is purchased on 1st April,
2019.
Q.4
Cost of asset 100,000
Residual value 10,000
Useful life 4 years
Date of purchase 1.1.2016

Required:
Calculate depreciation expense for the whole life of asset under both straight line and
reducing balance methods.
Q.5 Following balances are appearing in the books of Raheel as on 1.1.2015.
Asset A/C 50,000
Acc. Dep. A/C 20,000
Additions of 15,000 took place on 1.3.2015. Rate is 20% on WDV method.
Requirement: Asset and Acc. Dep A/Cs as on 31st December 2015.
Homework:
1. Mr. Moin has purchased a machine costing Rs. 600,000 on 1.1.2008. Calculate depreciation for
first
4 years using WDV method. Rate is 10%. The year end is December 31.
2. Mr. Shaban has purchased a machine costing Rs. 60,000 on 1.4.2008. Calculate depreciation for
first
3 years using WDV method. Rate is 10% and year end is 31 December.
3. Mr. Umair purchased a computer on 1 March 2007.
Calculate depreciation for first 3 years on WDV method @ 15%. Cost is Rs. 200,000. Year end
is December 31.
4. Mr. Aamir has purchased building on 1.7.2008. Calculate depreciation on WDV method for
first three years @ 20%. Cost is Rs. 300,000. Year end is September 30.
5. A Gill, purchased a notebook PC on 1.1.2005 for Rs. 2,600. It has an estimated life of four years
and a scrap value of Rs. 200.
She is not certain whether she should use the straight line or the reducing balance basis for the
purpose of calculating depreciation on the computer.
Required:
You are required to calculate the depreciation (to the nearest Rs.) using both methods, showing
clearly the balance remaining in the computer account at the end of each of the four years under
each method. (Assume that 45 per cent per annum is to be used for the reducing balance method.
6. A machine costs Rs. 8,000 on 1.1.2005. It will be kept for five years, and then sold for an
estimated figure of Rs. 2,400. Show the calculations of the figures for depreciation (to nearest
Rs.) for each of the five years using (a) the straight-line method, (b) the reducing balance method,
for this method using a depreciation rate of 20 per cent. Year end is December 31. Show clearly
the WDV of the asset at the end of each of the year.
7. A photocopier costs Rs. 23,000 on 1.1.2005. It will be kept for four years, and then traded-in for
Rs.4,000. Show the calculations of the figures for depreciation for each year using (a) the
straight-line method, (b) the reducing balance method, for this method using a depreciation rate
of 35 per cent. Year end is December 31. Show clearly the WDV of the asset at the end of each
of the year.
8. Mr. Taimoor has started the business on January 1, 2009 of manufacturing cars. He has
disclosed the following data for first three years of his business operations which relates to
additions in fixed assets:
Yearend December 31, 2009
Asset-1 1.1.2009 30,000
Asset-2 1.7.2009 10,000

Asset-3 1.4.2010 50,000

Asset-4 1.7.2011 60,000
Method is WDV for depreciation and rate is 10%.
Required:
Prepare relevant accounts for years ended December 31, 2009, 2010 and 2011.
9. Mr. Wasif has informed you that following balances are appearing on 1.1.2013 in his books of
accounts:
Accumulated
Cost
Depreciation
Building 400,000 150,000
Following is the detail of additions during the year ended December 31, 2013:
Date of Cost
Purchase
Building – Defense 1.3.2013 300,000
Building – Green Town 1.8.2013 100,000
Method for depreciation is WDV and rate is 20%.
Required:
10. Mr. Ali has informed you that following balances are appearing on 1.1.2013 in his books of
accounts:
Accumulated
Cost
Depreciation
Machinery a/c 600,000 300,000
Following is the detail of additions during the year ended December 31,
2013:
Date of Cost
Purchase
Cutter machine 1.3.2013 500,000
Molding machine 1.8.2013 250,000
Required:
11. Mr. Faiq has informed you that following balances are appearing on 1.1.2009 in his books of
accounts:
Accumulated
Cost
Depreciation
Machinery a/c 600,000 200,000
Following is the detail of additions during the year ended December 31,
2009:
Date of Cost
Purchase

Machinery B 1.3.2009 10,000

Machinery C 1.5.2009 70,000
Required:
Classwork:
1. Discussed lecture 17 classwork Q1; Q4 and Q5;
2. Solved following questions:
1. Mr. Moin has provided the following details of ledger balances appearing in his books as on
1.1.2016
Asset A/C 250,000
Acc. Dep. A/C 180,000
Following additions took place
Date Cost
1st April 2016 40,000
1 June 2017
st
90,000
Rate of Depreciation is 20% on WDV method.
Requirement: Prepare Asset and Acc. Dep. a/c as on 31st December 2016 and 2017 along with
income statement and balance sheet extracts.
Disposal of fixed assets under reducing balance method.
2. Following balances are appearing in the books of Rehmat as on 1.1.12.
Asset 900,000
Acc. Dep. 200,000
Additions of Rs.90,000 is made on 1.8.12. Further an asset costing Rs.80,000 as on 1.4.09 is
disposed of on 30.6.12 for Rs. 45,000 only. Rate is 10% WDV.
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31.12.12.
Homework:
1. Following balances are appearing on 1.1.2014.
Plant A/C 400,000
Acc. Dep. A/C 150,000
Addition of Rs.30,000 took place on 1 March 2014. An asset which was purchased on 1st
st
May 2011 costing Rs.90,000 was disposed off on 30th September 2014 for Rs.12,000 only.
Dep rate is 20% WDV.
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31.12.14.
2. Following balances are appearing on 1.Oct.13.
Cost 30,000
Acc. Dep. 12,000
Details of Disposal:
D.O.P D.O.S Cost Sale Proceed
1.3.2011 31.12.13 10,000 2,000
1.2.2010 31.3.14 4,000 1,000
Requirement: Prepare Asset, Acc. Dep. & disposal A/Cs as on 30.Sep.14. Rate is 10% WDV.
Umair Sheraz Utra, ACA. P a g e | 10

3. A company maintains its fixed assets at cost. Depreciation provision accounts for each asset are
kept.
Total cost to date Total depreciation to date
Machinery 94,500 28,350
The following additions were made during the financial year ended 31 December 20X9.
• Machinery Rs. 16,000, office furniture Rs. 460. Both of the additions were made on 1
October 20X9.
• A machine bought on 1 July 20X5 for Rs. 1,600 was sold for Rs. 360 during the year on
31October 20X9.
• The rates of depreciation are:
Machinery 20 percent, office furniture 10 percent, using the straight-line basis
Required
Show the asset and accumulated depreciation accounts for the year ended 31 December 209. (8)
4. Mr. Ijaz has provided following data for year ended 31 December, 2013:
Accumulated
Cost
Depreciation
1.1.2013 1.1.2013
Machinery 600,000 200,000
- An asset costing Rs. 70,000 is purchased on 1.4.2013.

- An asset costing Rs. 90,000 on 1 November, 2010 is sold for Rs. 36,000 on 30.6.2013.
Required:
Prepare relevant accounts for year ended December 31, 2013 assuming the method is straight
line and rate of depreciation is 10%. (8)
5. A company maintains its fixed assets at cost. Accumulated provision for depreciation accounts
are kept for each asset.
Total Cost To Date Total Depreciation To Date
Rs. Rs.
Machinery 52,950 28,350
The following transactions were made in the year ended 31 December 20X9:
(a) Purchased - machinery Rs. 2,480 and office furniture Rs. 320 both on 1 March 20X9
(b) Sold machinery for Rs. 800 on 31 January 20X9 which had cost Rs. 2,800 when purchased
on 1 December 20X5.
Depreciation is charged, on a straight line basis, at 10% on machinery and at 5% on office
furniture.
Required:
Show the asset and accumulated provision for depreciation accounts for the year 31 December
20X9. (8)
Lecture 6 (IAS-16 Solution ) Lecture 18 (overall)
Answer-3
Dr. Machinery account – At cost Cr.

1.1.20X9 b/d 94,500 Disposal 1,600

1.10.20X9 Cash 16,000 31.12.X9 c/d 108,900
Dr. Machinery account – Accumulated depreciation a/c Cr.

Disposals (W-2) 1,387 1.1.X9 b/d 28,350
31.12.X9 c/d 46,610 Depreciation (W-1) 19,647
Dr. Office furniture account – At cost Cr.

1.1.20X9 b/d 3,200
1.10.20X9 Cash 460 31.12.X9 c/d 3,660
Dr. Office furniture account – Accumulated depreciation a/c Cr.

1.1.X9 b/d 1,280
31.12.X9 c/d 1,612 Depreciation (W-3) 332
WORKINGS
(W-1) Depreciation – machinery
On opening assets excluding disposals (94,500 − 1,600)  20% 18,580
On additions (16,000  20%  3/12) 800
On disposals
- Machinery sold on October 31st (1,600  20%  10/12) 267
19,647
(W-2) Accumulated depreciation of disposals of machinery

Number of period in use (1.7.20X5 − 31.10.20X9) 4 Years and 4 months
Accumulated depreciation (1,600  20%  4.3333 Y) 1,387
(W-3) Depreciation - office furniture

On opening assets excluding disposals (3,200  10%) 320
On additions (460  10%  3/12) 12
332
Answer-4
Dr. Machinery – cost Cr.
1.1.13 b/d 600,000 30.6.13 Disposal 90,000
1.4.13 Cash 70,000
31.12.13 c/d 580,000
Dr. Accumulated Depreciation Cr.

Disposal (W-2) 24,000 1.1.13 b/d 200,000
Depreciation (W-1) 60,750
31.12.13 c/d 236,750
WORKINGS
(W-1) Depreciation expense
- On opening assets excluding disposals (600,000 – 90,000)  10% 51,000
- On additions (70,000  10%  9/12) 5,250

- On disposals (90,000  10%  6/12) 4,500

60,750
(W-2) Accumulated Depreciation of Disposals
Years used (2y and 8 months) 2.6667 year
Accumulated Depreciation (90,000  10%  2.6667 24,000
years)
Dr. Disposal A/c Cr.
Machinery 90,000 Accumulated Depreciation 24,000
Cash 36,000
P/L (Bal.) 30,000
Answer-5
Dr. Machinery account – At cost Cr.
1.1.20X9 b/d 52,950 Disposal 2,800
1.3.20X9 Cash 2,480 31.12.X9 c/d 52,630
Dr. Machinery account – Accumulated depreciation a/c Cr.

Disposals (W-2) 887 1.1.X9 b/d 28,350
31.12.X9 c/d 32,708 Depreciation (W-1) 5,245
Dr. Office furniture account – At cost Cr.

1.1.20X9 b/d 2,860
1.3.20X9 Cash 320 31.12.X9 c/d 3,180
Dr. Office furniture account – Accumulated depreciation a/c Cr.

1.1.X9 b/d 1,490
31.12.X9 c/d 1,646 Depreciation (W-3) 156
WORKINGS
(W-1) Depreciation – machinery
On additions (2,480  10%  10/12) 207
On disposals
- Machinery sold on January 31st (2,800  10%  1/12) 23
5,245
Number of period in use (1.12.20X5 − 31.1.20X9) 3 Years and 2 month
Accumulated depreciation (2,800  10%  3.1667 Y) 887
(W-3) Depreciation - office furniture
On opening assets excluding disposals (2,860  5%) 143
On additions (320  5%  10/12) 13
156
Classwork:
1. Solved lecture 18 classwork question 1;
2. Discussed lecture 18 homework question 1 and 2.

3. Started discussion Exchange of Assets.

Homework:
Q.1) Mr. Qasim owns a mobile nokia 3310 which he purchased on 1.4.2012 for Rs.3,000. On 1.1.14,
He went to Hafeez Center where He saw a Samsung galaxy. He said, “Oh! What a beautiful
mobile it is”. It bore a price label of Rs.50,000. He immediately decided to exchange the old sick
mobile with the new one. The value assigned by the shopkeeper to old mobile was Rs.1200 only.
Resultantly, he paid Rs.48,800 for new mobile. The rate of depreciation is 10%.
Required: Pass the journal entry for exchange on 1.1.2014.
Q.2) On 1.4.2012 we exchanged two old cars with a new car. The cost of one old car is Rs.400,000.
These were purchased 4 years back (1.4.2008). The trade in allowance (exchange allowance) is
Rs.180,000 per car. The cost of new car is 1,200,000. Rate is 10% S.L
Required: Pass the journal entry for exchange.
Q.3) Following ledger balances are appearing on 1.1.15.
Asset 200,000
Acc. Dep. 80,000
i. Addition of 10,000 took place on 1.3.15
ii. An old asset costing Rs.50,000 which was purchased on 1.7.2013 is exchanged with a new
asset costing Rs.90,000. The transaction took place on 30th September, 2015 and T.I.A is
Rs30,000. Rate is 10% S.L.
Required: Prepare Asset, Acc. Dep. & disposal A/Cs as on 31st December 2015 along with
journal entry.
Answer-3
Dr. Asset A/C – At cost Cr.
1.1.2015 b/d 200,000 Disposal 50,000
1.3.2015 Cash 10,000
30.9.15 Disposal (New) 90,000 31.12.X5 c/d 250,000
Dr. Accumulated depreciation a/c Cr.

Disposals (W-2) 11,250 1.1.15 b/d 80,000
31.12.X5 c/d 90,583 31.12.15 Depreciation (W-1) 21,833
Dr. Disposal A/C Cr.

Cash 60,000 Acc. Depreciation 11,250
Asset A/C 50,000 Asset A/C 90,000
P/L (Bal). 8,750
WORKINGS
(W-1) Depreciation Expense
On additions (10,000  10%  10/12) 833
Addition through exchange (90,000  10%  3/12) 2,250

On disposals
- Old asset on September 30 (50,000  10%  9/12) 3,750
21,833

Number of period in use (1.7.2013 − 30.09.2015) 2 Years and 3 months
Accumulated depreciation (50,000  10%  2.25 Y) 11,250
Classwork:
4. Solved lecture 19 homework questions;
5. Determination of cost of new asset in an exchange transaction using class example (3 scenarios).
Example 1: (Fair values of both old and new assets are given)
Following data relates to an exchange transaction. You are required to pass the journal entry
of exchange transaction.
Rs.
Cost of old asset 100
Accumulated depreciation of old asset 60
Fair value of old asset 50
Fair value of new asset 80
Cash paid 60
Example 2: (Fair value of only new asset is given)
Rs.
Fair value of old asset X
Fair value of new asset 800
Cash paid 600
Example 3: (Fair values of both old and new assets are not given)
Rs.
Fair value of old asset X
Fair value of new asset X
Cash paid 500
Homework:
1. The following information is available in respect of machines of Akmal Brothers:

(i) The balances of cost and accumulated depreciation of machines as on 1 January 2017
were Rs.800,000 and Rs.333,000 respectively.
(ii) A machine acquired on 1 January 2014 having net book value of Rs.31,935 on
1 January 2017 was sold for Rs.34,000 on 30 April 2017. Cost of disposal incurred was
Rs.5,000.
(iii) On 1 July 2017, a machine having fair value of Rs.40,000 on that date was exchanged
for a new machine. The balance of the purchase price was paid through a cheque of
Rs.80,000. The list price of the new machine was Rs.130,000. The old machine had
been acquired at a cost of Rs. 65,000 on 1 October 2015.
(iv) Machines are depreciated at 15% per annum using the reducing balance method.
Required: Prepare the following ledger accounts pertaining to the machines for the year ended
31 December 2017:
(a) Cost (03)
(b) Accumulated depreciation (05)
(c) Gain/loss on disposal (04)
{Autumn 2018, Q # 5}
2. Following information pertains to three exchange transactions relating to fixed assets:
(i) (ii) (iii)
--------- Rs. in million ---------
Cash received/(paid) 1.1 (2.1) -
Assets given-up:
Original cost 10.3 12.4 14.5
Book value 6.4 7.3 3.4
Estimated fair value 8.5 6.6 4.6
Assets received:
Estimated fair value 7.1 9.0 4.1
Additional information:
• In case of transaction (i), fair values of both assets are reliably measurable.
• In case of transaction (ii), fair value of the asset received is clearly more evident.
• In case of transaction (iii), fair value of neither asset is reliably measurable.
Required:
Compute gain or loss on disposal of fixed assets in each of the above transactions. (06)
{Spring 2018, Q # 6}
Solution Q.1:
Machine Account – Cost

Rs. Rs.
1-1-17 Balance b/d 800,000 30-4-17 Disposal (W-1.1) 52,000
1-1-17 Disposal(80,000+40,000) 120,000 30-6-17 Disposal 65,000
31-12-17 Balance c/d 803,000
920,000 920,000
Accumulated Depreciation Account

Rs. Rs.
30-4-17 Disposal (W-1.2) 21,662 1-1-17 Balance b/d 333,000

30-6-17 Disposal (W-3) 15,810 31-12-17 Depreciation(W- 71,868

4)
31-12-17 Balance c/d 367,396
404,868 404,868
Disposal Account
Rs. Rs.
Machine 52,000 Acc. depreciation 21,662
Bank (34,000 – 5,000) 29,000
Loss on disposal 1,338
52,000 52,000
Disposal Account
Rs. Rs.
Machine 65,000 Acc. Depreciation 15,810
Bank 80,000 Machine (80,000+40,000) 120,000
Loss on disposal 9,190
122,000 122,000
(W-1)
1-1-14 Cost 100
31-12-14 Dep 100  15% (15)
31-12-14 WDV 85
31-12-15 Dep 85  15% (12.75)
31-12-15 WDV 72.25
31-12-16 Dep 72.25  15% (10.84)
31-12-16 WDV 61.4125 WDV (Given) 31,935
30-4-17 Dep 61.4125  15%  4/12 (3.07) Dep 31935 x 15%  4/12 (1,597)
30-4-17 WDV 58.34 WDV 30,338
(W – 1.1)
Rs. %
1-1-17 Cost 52,000 100
Less Accumulated Depreciation (20,065) (38.5875)
WDV 31,935 61.4125
61.4125 – 31,935
31,935
1− × 100 = 52,000
61.4125
(W – 1.2)
Accumulative depreciation = 52,000 – 30,338 = 21,662
(W-2)
Cost of New Asset = Cash paid + Trade In Allowance (FV of old asset)
= 80,000 + 40,000 = 120,000
(W-3)
1-10-15 Cost 65,000

31-12-15 Depreciation 65,000  15%  3/12 (2,438)

31-12-15 WDV 62,562
31-12-16 Depreciation 62,562  15% (9,384)
31-12-16 WDV 53,178
31-12-17 Depreciation 53,178  15%  6/12 (3,988)
31-6-17 WDV 49,190
(W – 3.1)
Accumulative depreciation = = 65,000 – 49,190 = 15,810
(W-4)
Depreciation Expenses
Depreciation on opening asset excluding disposal
= (800,000 – 333,000) – 53,178 – 31,935 = 381,887  15% 57,283
Depreciation on addition
= 120,000  15%  6/12 9,000
Depreciation on disposal W-1 1,597
W-3 3,988
71,868
Solution Q.2:
Particulars Dr. Cr.

(1) Asset (new)(8.5 - 1.1) 7.4
Cash 1.1
Acc. Dep. 3.9
Asset(old) 10.3
Gain(bal) 2.1
(2) Asset(new) 9
Acc.dep(12.4 - 7.3) 5.1
P/L bal 0.4
Asset(old) 12.4
Cash 2.1
(3) Asset(new) 3.4
Acc dep 11.1
Asset (old) 14.5
Classwork:
6. Solved lecture 20 homework questions 1 (Akmal Brothers);
7. Started discussion on Change in estimate and solved following questions:
Q.1 Mr. Umar purchased an asset costing Rs.20,000 on 1.1.2012. Life of asset is 10 years and
its R.V is Rs.2,000.
On 1.1.2014 it is estimated that its remaining life is only 6 years / its total life is 8 years.
Required: Calculate depreciation expense for the years ended December 31, 2012-13-14.
Q.2 On 1.12015 an asset costing Rs.90,000 is purchased with an R.V of 10,000 and life of 16
years. On 1.1.2018 it is estimated that total life is 10 years and new R.V is 5,000 only.

Required: Calculate depreciation for the years ended December 31, 2015 to 2019.
Q.3
D.O.P Cost R.V Rate
1.1.15 100,000 20,000 10% S.L
On 1.1.17 depreciation method is changed to WDV with a new rate of (?). There is no
change in R.V.
Required: Calculate Depreciation for the years ended December 31, 2015 to 2018.
Q.4
D.O.P Cost R.V Rate
1.7.16 200,000 20,000 20% WDV
On 1.7.18 the depreciation method is changed to S.L with total life of 10 years (30.6.2016-
17-18-19)
Required: Calculate Depreciation for the years ended 30th June 2017 to 2019.
Q.5
D.O.P Cost R.V Life
1.1.10 50,000 10,000 10 years
Method used is WDV. On 1.1.12 the total life is estimated at 5 years with no change in
method and R.V.
Required: Calculate Depreciation for the years ended December 31, 2010 to 2013.
Homework:
Lecture 10 (IAS16) Lecture 22 (Overall

Classwork:
1) Homework of lecture 21 (change in estimate questions 1; 2 and 3) discussed.
2) Discussed preparation of asset account on book value
Q1. Following ledger balance is appearing in the books on 1.1.12.
Asset-BV 200,000
i. Addition costing 90,000 took place on 1.3.12.
ii. An asset costing Rs. 50,000 which was purchased on 1.4.2010 is disposed of on 30.6.2012 for
Rs. 20,000 only. Rate of depreciation is 20%WDV.
Requirement: Prepare Asset & disposal A/Cs as on 31.12.12.
Homework
1. Homework of lecture 20 (change in estimate questions 4 and 5);
2. Following questions for preparation of asset account at book value:
Q1. Following ledger balances is appearing on 1.1.13.
Asset-BV 80,000
i. Addition costing 5,000 took place on 1.7.13
ii. An asset having BV of Rs.12,000 on 1.1.2013 is disposed of on 30.9.2013 for Rs.1,000 only.
Rate of Dep is 10%WDV.
Requirement: Prepare Asset & disposal A/Cs as on 31.12.13.
Q2. Following balance is appearing on 1.7.14.
Asset-BV 70,000
i. Addition on 1.3.2015 is Rs.10,000.

ii. An asset having BV of Rs.4,000 on 1.7.2014 is disposed of on 31.3.2015 for nil value.
iii. An asset costing Rs. 25,000 which was purchased on 1.10.2012 is exchanged with a new
asset costing Rs.40,000 on 31.5.2015. Net cash paid is Rs.12,000.
Requirement: Prepare Asset & disposal A/Cs as on 30.6.15. Rate is 10% on WDV.
Q3. A trading organisation charges depreciation on its plant and machinery on a reducing balance
method @ 15% per annum. On 1 July 2011, the net book value in the ledger stood at Rs.
5,660,000. Movements in the plant and machinery account during the two years ended 30 June
2013 were as follows:
Date Particulars
1 October 2011 A new machine costing Rs. 80,000 was purchased. A sum of Rs. 30,000
was paid on the same date and the balance was paid on 31 March 2012.
1 December 2011 A machine that was purchased for Rs.200,000 and installed at a cost of
Rs.10,000 on 1 August 2009 was fully destroyed in an accident.
1 February 2012 Some old machinery (book value on 1 July 2011 Rs. 20,000) was sold for
Rs.8,000.
30 November A machine imported on 1 July 2010 was disposed of for Rs. 63,000. The
2012 value of machine was Rs. 70,000 whereas import levies amounted to Rs.
5,000.
Required:
Prepare the plant and machinery account for the years ended 30 June 2012 and 2013. (19)
(Autumn 2013, Q.6, CAF-05)
Solution of homework Q1
Dr. Asset a/c – WDV Cr.
1.1.13 b/d 80,000 30.9.13 Disposals (W-1) 11,100
1.7.13 Additions 5,000 Depreciation expense (W-2) 7,950
31.12.13 c/d (bal.) 65,050
(W-1) WDV of disposals made on 30.Sep.2013 Rs.

1.1.13 WDV 12,000
30.9.13 Depreciation (12,000 x 10% x 9/12) (900)
30.9.13 WDV 11,100
(W-2) Depreciation expense for year ended 31.12.2013

Depreciation on opening assets excluding disposals (80,000 – 12,000) x 10% 6,800
Depreciation on additions (5,000 x 10% x 6/12) 250
Depreciation on disposals (W-1) 900
7,950
Dr. Asset a/c – WDV Cr.
1.7.14 b/d 70,000 31.3.15 Disposals (W-1) 3,700
1.3.15 Additions 10,000 31.5.15 Disposals (W-2) 17,014
Depreciation expense (W-3) 7,077
31.12.13 c/d (bal.) 52,209
(W-1) WDV of disposals made on 31.Mar.2015 Rs.

1.7.14 WDV 4,000

31.3.15 Depreciation (4,000 x 10% x 9/12) (300)

31.3.15 WDV 3,700
(W-2) WDV of disposals made on 31.May.2015 Rs.

1.10.12 Cost 25,000
30.6.12 Depreciation (25,000 x 10% x 9/12) (1,875)
WDV 23,125
30.6.13 Depreciation (23,125 x 10%) (2,313)
WDV 20,812
30.6.14 Depreciation (20,812 x 10%) (2,081)
WDV 18,731
31.5.15 Depreciation (18,731 x 10% x 11/12) (1,717)
31.15.15 WDV 17,014

Depreciation on opening assets excluding disposals (70,000 – 4,000 – 18,731) x 10% 4,727
Depreciation on additions (10,000 x 10% x 4/12) 333
Depreciation on disposals 300 (W-1) + 1,717 (W-2) 2,017
7,077
Dr. Plant and Machinery a/c – WDV Cr.
1.7.11 b/d 5,660,000 Disposals (W-1) 144,334
1.10.11 Additions 80,000 Disposals (W-2) 18,250
30.06.12 c/d (bal.) 4,734,137
1.7.12 b/d 4,734,137 Disposals (W-4) 50,801
30.06.13 c/d (bal.) 3,977,957
(W-1) WDV of disposals made on 1.Dec.2011

Cost (1.08.09) (200,000 + 10,000) 210,000
Depreciation (30.06.10) (210,000 x 15%x 11/12) (28,875)
WDV 181,125
Depreciation (30.06.11) (181,125 x 15%) (27,169)
WDV 153,956
Depreciation (01.12.11) (153,956 x 15% x 5/12) (9,622)
WDV (1.12.11) 144,334
(W-2) WDV of disposals made on 1.Feb.2012

WDV 20,000
Depreciation (1.02.12) (20,000 x 15% x 7/12) (1,750)
WDV (30.06.12) 18,250

Depreciation on opening assets excluding disposals
Opening WDV of all assets (W-3) 5,660,000

Less: Opening WDV of

disposals (153,956 + 20,000) (173,956)
5,486,044 15% 822,907
(80,000 x 15% x
Depreciation on additions 9/12) 9,000
Depreciation on disposals during the
year (9,622 + 1,750) 11,372
843,279
(W-4) WDV of disposals made on 30.Nov.2012

Cost (1.07.10) (70,000 + 5,000) 75,000
Depreciation (30.06.11) (75,000 x 15%) (11,250)
WDV 63,750
Depreciation (30.06.12) (63,750 x 15%) (9,563)
WDV 54,188
Depreciation (30.11.12) (54,188 x 15% x 5/12) (3,387)
WDV (30.11.12) 50,801

Depreciation on opening assets excluding disposals
Opening WDV of all assets (W-5) 4,734,137
Less: Opening WDV of disposals (W-1) (54,188)
4,679,949 15% 701,992
Depreciation on disposals during the year (W-4) 3,387
705,379
Lecture 11 (IAS-16) Lecture 23 (Overall)

Classwork:
INITIAL RECOGNITION of an item as property, plant and equipment;
INITIAL MEASUREMENT of an item of property, plant and equipment:
LO 2 ELEMENTS OF COST
The cost of an item of property, plant and equipment comprises:
(a) Its purchase price, import duties and non-refundable purchase taxes after deducting trade
discounts and rebates.
(b) Any costs necessary to bring the asset into current location and condition intended by
management.
(c) The initial estimate of the costs of dismantling and removing the item and restoring the site.
Examples of directly attributable costs are:
(a) Costs of employee benefits arising directly from the construction or acquisition of an item of
property, plant and equipment.
(b) Costs of site preparation
(c) Initial delivery and handling charges.
(d) Installation and assembly cost.
(e) Cost of testing whether the asset is functioning properly, after deducting the net proceeds from
selling any items produced (such as samples produced when testing equipment); and
(f) Professional fees.

LO 2.1 Not a part of cost of asset

Examples of costs that are not costs of an item of property, plant and equipment are:
(a) Costs of opening a new facility.
(b) Cost of introducing a new product or service (including costs of advertising and promotional
activities);
(c) Costs of conducting business in a new location or with a new class of customer (including
costs of staff training); and
(d) Administration and other general overhead costs.
Following costs are not included in the carrying amount e.g.,
(a) Costs paid while an item is yet to be brought into use or is operated at less than full capacity.
(b) Initial operating losses while demand for the product’s output builds-up; and
(c) Costs of relocating/re-organizing part or all of entity’s operations.
Example
A new machine is purchased by Arman Enterprise. Relevant details are as follows:
List price 800,000
Trade discount 10%
Import duties 4,000
Non-refundable taxes 6,300
Income tax adjustable 5,000
Insurance in-transit 7,000
Fees paid to clearing agent 9,000
Octroi charges 4,600
Land preparation cost 8,300
Installation cost 7,800
Estimate of initial cost of dismantling 5,000
Cost of furniture broke down during handling the machine 7,000
Insurance for the year 9,000
License fee for the year 11,000
Initial operating losses 12,000
Trial production cost net of sale proceeds of prototype/sample (4,000 – 2,100) 1,900
Calculate the cost at which machine should be debited?
3) Cessation of capitalization
Recognition of costs ceases when the item is in the location and condition necessary for it.
4) SUBSEQUENT EXPENDITURE
Subsequent costs normally include:
a. Repair and maintenance – Expense out
b. Expenditure to improve asset - Capitalize
c. Replacement of a part - Capitalize
5) Subsequent measurement of an item of property, plant and equipment;
6) Depreciation discussion:
(i) Discussed concept of monthly depreciation using a simple class example;
(ii) Discussed the concept of start of depreciation and its continuance in case asset becomes idle
during the year.
7) Discussed output method of depreciation using a simple class example.

Homework
1. Following information pertains to plant and machinery of Alpha Enterprises (AE):
(i) As at 1 January 2018, balances of cost and accumulated depreciation amounted to Rs.12,700,000
and Rs.6,240,000 respectively.
(ii) On 1 April 2018, an old machine having fair value of Rs.340,000 was exchanged for a new
machine. The balance of the purchase price was paid through a cheque of Rs.680,000. The list price
of the new machine was Rs.1,130,000. The old machine had been acquired for Rs.870,000 on 1
September 2015.
(iii) On 1 February 2018, a plant having a list price of Rs.10,000,000 was acquired. A trade discount of
5% was allowed on the list price. The plant was ready for use on 1 August 2018 after incurring the
following costs:
Rs. in ‘000
Freight charges 660
Consultant fees 540
Installation and testing 600
Administration and other general overheads 160
Staff training 120
Opening ceremony 100
2,180
(iv) On 31 October 2018, another machine was sold for Rs.334,000. It was acquired on
1 January 2015 and had a net book value of Rs.512,000 on 1 January 2018. A cost of Rs.25,000
was incurred on its disposal.
(v) AE depreciates plant and machinery at 20% per annum using the reducing balance method.
Required:
Prepare following ledger accounts pertaining to the plant and machinery for the year ended 31
December 2018:
(a) Cost (06)
(b) Accumulated depreciation (06)
(c) Assets disposal (04)
(Autumn 2019, Q # 06)
2. Shangrila Enterprises (SE) expanded its production facility by installing a plant in 2019.
Following information pertains to the plant:
(i) Two vendors A and B submitted their bid prices of Rs. 750 million and Rs. 800 million
respectively. Due to better quality, vendor B was selected and after negotiations, price of the
plant was finalized at Rs. 780 million.
(ii) The acquisition of the new plant was financed by selling an old plant having book value of
Rs. 170 million for Rs. 140 million and remaining amount was arranged by selling investments
held by SE.
(iii) Arrival of the plant was originally scheduled on 31 March 2019 at a freight of Rs. 3.5 million.
However, the arrival date was rescheduled to 31 January 2019 by paying additional freight of
Rs. 1.5 million. While transporting, the plant was slightly damaged and repaired at a cost of
Rs. 2 million.
(iv) Site preparation work was completed at a cost of Rs. 5.8 million. This cost includes
Rs.1.2 million for demolition and reconstruction of the existing building structure.
(v) Installation work was carried out during the month of February 2019 at a cost of Rs. 5 million.
In addition, overheads of Rs. 1.5 million were allocated for using factory resources during
installation.
(vi) The plant was customised by altering some parts at a cost of Rs. 12 million. The alteration
slows down the production process but is necessary to align the plant with existing production
process.

(vii) On 1 March 2019, safety equipment for the use of staff operating the plant were purchased at
a cost of Rs. 10 million. Expected useful life of the safety equipment is 5 years.
(viii) The plant was available for use on 1 May 2019 but due to unavailability of the required raw
material, commercial production was delayed till 1 June 2019.
(ix) Residual values of the plant at the end of its useful life and economic life of 20 years and 25
years are estimated at Rs. 100 million and Rs. 40 million respectively.
Required:
Compute book value of the plant as at 31 December 2019. (08)
(Items ignored while computing cost of the plant should be mentioned as zero)
(Spring 2020, Q # 01)
3. Ammar is a manufacturer of personal products and has factories in two different cities. On 1
November 2011, he bought a new state-of-the-art plant from Krones Inc. USA. The invoice value
of the plant was Rs. 250 million. Other relevant details are as follows:
(i) Costs of import:
Rs. in million
LC opening charges 1.00
Import duty 25.00
Sales tax paid, recoverable against production output 40.00
Clearing & transportation 5.00
(ii) Costs incurred on SITE preparation:
Amount paid to consultants 2.00
Civil and electrical works 3.00
The above includes cost of equipment damaged due to mishandling 0.80
(iii) The plant was received at the SITE on 1 February 2012. The installation and test run were
successfully completed in three months time at a cost of Rs. 6 million. The net sale proceeds
of test production were Rs. 1.2 million.
(iv) Commercial production commenced on 1 May 2012. During the period in which the plant
was installed, administration and general overheads increased by Rs. 1 million as compared
to the previous period.
(v) Salary of factory manager is Rs. 250,000 per month. He contributed 30% of his time in
supervising the installation.
(vi) Staff training cost amounted to Rs. 0.25 million.
(vii) The plant is expected to last fifteen years with no residual value.
Required:
In accordance with IAS-16 calculate:
▪ Cost at which the plant would be capitalised.
▪ Depreciation for the year ended 31 December 2012 under the straight line method. (08)
{Spring 2013, Q.1 (b)}
(a) What conditions must be satisfied if an item has to be recognized as property, plant and equipment?
Also state at what amount such item shall be carried after the initial recognition if the entity is
following the revaluation model.
(b) On 1 January 2013 Delta acquired a specialized machine for its production department. The
available information is as follows:

Rupees
List price of machine 9,200,000
Freight charges 263,000
Electrical installation cost 245,000
Staff training for use of machine 351,000
Pre-production testing 193,000
Purchase of a three year maintenance contract 528,000
Estimated residual value 175,000
Trade discount on list price 5%

Early settlement discount taken 3%
Estimated life (in machine hours) 12,000
Machine hours used during the years ended 31 December 2013, 2014 and 2015 were 2,000, 3,200
and 1,400 respectively.
On 1 January 2015 Delta decided to upgrade the machine by adding new components at a cost of
Rs.1,753,000. This upgrade led to a reduction in the production time per unit or goods being
manufactured by the machine. The upgrade also increased the estimated remaining life of the
machine at 1 January 2015 to 8,000 machine hours and its estimated residual value to Rs.350,000.
Required:
For the years ended 31 December 2013, 2014 and 2015, compute the relevant amounts to be
included (under each head) in the income statement and statement of financial position.
Notes to the financial statements are not required. (10)
{Spring-16 Q.4 CAF-05}
Solution HW Q1 (Alpha Enterprises)
Plant and machinery - Cost
Date Description Rs. in '000 Date Description Rs. in '000
1-Jan-2018 Balance 12,700 1-Apr-2018 Assets disposal 870
1-Apr-2018 Exchanged (340 + 680) 1,020 31-Oct-2018 Assets disposal (W-2) 1,000
1-Aug-2018 Capital work in progress (W-4) 11,300 31-Dec-2018 Balance 23,150
25,020 25,020
Accumulated depreciation - Plant and machinery

1-Apr-2018 Assets disposal (W-1) 376 1-Jan-2018 Balance 6,240
31-Oct-2018 Assets disposal (W-2) 573 31-Dec-2018 Depreciation exp. (W-3) 2,292
31-Dec-2018 Balance 7,583

8,532 8,532
Assets disposal - Plant and machinery

1-Apr-2018 Cost 870 1-Apr-2018 Acc. depreciation (W-1) 376
31-Oct-2018 Cost 1,000 1-Apr-2018 Cost (Trade in) 340
31-Oct-2018 Bank (disposal cost) 25 31-Oct-2018 Acc. depreciation (W-2) 573
31-Oct-2018 Bank (Sales proceeds) 334
31-Dec-2018 Loss on disposal (P&L) 272
1,895 1,895
WORKINGS
(W-1) Accumulated depreciation – Machine exchange
Cost (01-09-15) 870
Depreciation expense (31-12-15) (870  20%  4/12) (58)

WDV (31-12-15) 812

Depreciation expense (31-12-16) (812  20%) (162)
WDV (31-12-16) 650
WDV (31-12-17) 520
Depreciation expense (31-03-18) (520  20% 3/12) (26)
WDV (31-03-18) 494
31-03-18 Accumulated depreciation (Cost - WDV) (870 − 494) 376

(W-2) Accumulated depreciation – Machine sold
Accumulated depreciation = Cost – WDV
Accumulated depreciation = 1,000 – 427 = 573
Rs. in '000
WDV as at 01-01-2018 512
Depreciation for 2018 512 × 0.2 × 10 ÷ 12 (85)
WDV as at 31-10-2018 427
(W-2.1) Cost of machine sold
Cost (01-01-15) 100
Depreciation expense (31-12-15) (100  20% ) (20)
WDV (31-12-15) 80
WDV (31-12-16) 64
Depreciation expense (31-12-17) (64  20%) (12.8)
WDV (31-12-17) 51.2
Cost (512/51.2  100) 1,000
Alternatively working of cost may be
Cost [512 ÷ (0.8)3] 1,000
(W-3) Depreciation expense for the year:
Rupees
On opening assets excluding disposals (12700 – 6240) − 520(W-1) – 512) = 5428  20% 1,086
On additions
Machine 1,020 × 0.2 × 9 ÷ 12 153
Plant 11,300 (W-4) × 0.2 × 5 ÷ 12 942
On disposals
Machine exchange (W-1) 26
Machine sold (W-2) 85
2,292
(W-4) Cost of the plant:
Rs. in '000
Purchase price of the plant 10,000 × 0.95 9,500
Other relevant cost 660 + 540 + 600 1,800
11,300
Solution HW Q2 (Shangrila Enterprises)
Book value of the plant as at 31 December 2019

Rs. in million
Initial cost of the plant:
(i) Cost of the plant 780.00
(ii) Sale of old plant/investments -
(iii) Freight charges 3.50 + 1.50 5.00
Repair of plant damages
(iv) Preparation of site 4.6 + 1.2 5.80
(v) Installation work 5.00
Allocated cost
(vi) Customization of the plant 12.00
(vii) Purchase of safety equipment -
Initial cost 807.80

(807.80 − 100) 8
Depreciation for 2019  (23.59)
20 12
Book value of the plant as at 31 December 2019 784.21
Solution HW Q3 (Ammar)
Plant will be capitalized at cost of Rs. 290 million (W-1).
Depreciation expense for the year ended 31.12.12 will be Rs. 12.89 million [290 (W-1) / 15 x 8/12]
(W-1) Rs in million
Invoice value 250
LC opening charges 1
Import duty 25
Clearing & transportation 5
Site preparation (2 + 3 – 0.8) 4.2
Test run cost (6 – 1.2) 4.8
290
(i) Sales tax recoverable is not a part of cost of asset.
(ii) It is not necessary to damage equipment for plant installation so it is excluded from cost.
(iii) Admin and general overheads are not a part of cost of asset.
(iv) Salary of factory manager is not a part of cost of asset.
(v) Staff training cost is not a part of cost of asset because we do not have control over it.
Solution HW Q4
(a) The cost of an item of property, plant and equipment shall be recognized as an asset if and only if:
(a) It is probable that future economic benefits associated with the item will flow to the entity; and;
(b) The cost of the item can be measured reliably.
An item which is revalued shall be carried at a revalued amount which is its fair value at the date of
the revaluation less any subsequent accumulated depreciation and accumulated impairment losses.
(b) Statement of Financial position (Extracts)
Rs.
2015 2014 2013
Machinery *11,194,000 9,441,000 9,441,000
Less: Accumulated Depreciation (5,210,294) (4,015,266) (1,544,333)
5,983,706 5,425,734 7,896,667
* 9,441,000 + 1,753,000 = 11,194,000
Income Statement (Extracts) 2015 2014 2013

Expenses
Depreciation 1,195,028 2,470,933 1,544,333
Staff training expense 351,000
Maintenance contract expense (528/3) 176,000 176,000 176,000
Other income
Discount received ((W-2) 8,740,000 × 3%) 262,200
Workings
(W-1) Depreciation expense
2013 ((9,441,000 − 175,000)  2,000/12,000) 1,544,333
2014 ((9,441,000 − 175,000)  3,200/12,000) 2,470,933
2015 [(5,425,734 + 1,753,000) − 350,000]  1,400 /8,000 1,195,028
Written down value at the time estimate is changed (9,441,000 − 1,544,333 − 2,470,933) 5,425,734
(W-2) Cost of asset
List price 9,200,000
Less: Trade discount (9,200,000  5%) (460,000)
8,740,000
Freight charges 263,000
Electrical installation 245,000
Pre-production testing 193,000
9,441,000
Lecture 14 (IAS16) Lecture 26 (Overall)
Revaluation of PPE
Classwork
Explained the concept of share capital and retained earnings using a simple class example. Started
revaluation and solved following questions:
Q.1) Company X purchased a building costing Rs.100 million on 1.1.2015. Its useful life is 20 years.
It is revalued on 1.1.2016 at Rs.120 million.
Required: Pass journal entries and prepare relevant ledgers for the years ended 31.12.15 & 31.12.16.
Q.2) An entity owns following asset:
Cost (1.1.2018) Rs.500
Life 10 years
Asset was revalued on 1.1.19 at Rs.900.
Required: Pass journal entries and prepare relevant ledgers for the years ended 31.12.18 & 31.12.19.
Homework:
Q.1) Classwork Q.2
Q.2) Details of an asset are:
Cost (1.1.2015) Rs.800
Life 20 years
Revalued amount on 1.1.17 Rs.1,000.
Required: Pass journal entries and prepare relevant ledgers for the years ended 31.12.15 to 31.12.17.
Solution classwork Q.2

Journal entries
Date Particulars Dr. Cr.

1.1.18 Asset 500
Cash 500
31.12.18 Depreciation 50
Accumulated depreciation 50
1.1.19 Accumulated depreciation 50
Asset 50
1.1.19 Asset 450
Revaluation surplus 450
31.12.19 Revaluation surplus 50
Retained earnings 50
Ledgers
Asset a/c
1.1.18 Cash 500 31.12.18 c/d 500
1.1.19 b/d 500 1.1.19 Accumulated 50
depreciation
1.1.19 Revaluation surplus 450 31.12.19 c/d 900
Accumulated depreciation a/c

31.12.18 c/d 50 31.12.18 Depreciation expense 50
1.1.19 Asset 50 1.1.19 b/d 50
Revaluation surplus a/c

31.12.19 Retained earnings 50 1.1.19 Asset 450
31.12.19 c/d 400
Working
Date Description Asset R/Surplus P/L
1.1.18 Cost 500
31.12.18 Dep. (500/10) (50)
31.12.18 WDV 450
1.1.19 Revaluation surplus (Bal.) 450 450
1.1.19 Revalued amount 900 450
31.12.19 Dep. (900/9) ; (450/9) (100) (50)
31.12.19 WDV 800 400
Solution homework Q.2

Journal entries
Date Particulars Dr. Cr.

1.1.15 Asset 800
Cash 800
1.1.17 Accumulated depreciation 80
Asset 80
1.1.17 Asset 280
Revaluation surplus 280
31.12.17 Revaluation surplus 16
Retained earnings 16
Ledgers
Asset a/c
1.1.15 Cash 800 31.12.15 c/d 800
1.1.16 b/d 800 31.12.16 c/d 800
1.1.17 b/d 800 1.1.17 Accumulated 80
depreciation
1.1.17 Revaluation surplus 280 31.12.17 c/d 1,000
Accumulated depreciation a/c

1.1.16 b/d 40
1.1.17 Asset 80 1.1.17 b/d 80
Revaluation surplus a/c

31.12.17 Retained earnings 16 1.1.17 Asset 280
31.12.17 c/d 264
Working
Date Description Asset R/Surplus P/L
1.1.15 Cost 800
31.12.15 Dep. (800/20) (40)
31.12.15 WDV 760
31.12.16 Dep. (800/20) (40)
31.12.16 WDV 720

1.1.17 Revaluation surplus (Bal.) 280 280

1.1.17 Revalued amount 1,000 280
31.12.17 Dep. (1,000/18) ; (280/18) (56) (16)
31.12.17 WDV 944 264

Q.1) Mr. Umer purchased a building costing Rs.500 million on 1.1.15, having life of 10 years.
Revaluations details:
• 1.1.16 Rs.900M
• 1.1.17 Rs.360M
Required: Pass journal entries and prepare relevant ledgers.
Q.2) Details of an asset are:
D.O.P. COST LIFE
1.1.18 200 20years
• 1.1.19 Rs.900
• 1.1.20 Rs.120
Required: Pass necessary journal entries.
Homework:
Q.1) An entity own following asset:

D.O.P. COST LIFE
1.1.10 100M 10years
• 1.1.12 Rs.120M
• 1.1.14 Rs.40M
Q.2) Cost of an asset on 1.1.15 is Rs.600. Life of the asset is 6 years. On 1.1.16 asset is revalued at Rs.400
with remaining life of 10 years.
Classwork
Q.1)
Asset purchased on 01-01-12
Cost of Asset 500
Useful life 20 Years
Revaluation Details:
01-01-14 800
01-01-16 250
01-01-18 600
Required: Prepare Journal entries from 2012 to 2018.
Q.2)
Asset Purchased on 1-07-08
Cost Rs.600

Useful Life 30 Years

It is revalued on 1.7.22 at Rs.800
Required: Prepare journal entries of 2023 (i.e. for the year ended 30.06.23)
Homework:
Q.1) Shahzad Textile Mills Limited (STML) purchased a plant for Rs. 500 million on 1 July 2010. The plant has
an estimated useful life of 10 years and no residual value.
STML uses revaluation model for subsequent measurement of its property, plant and equipment and accounts
for revaluations on net replacement value method. The details of revaluations performed by an independent
firm of valuers are as follows:
Revaluation date Fair value
1 July 2011 Rs. 575 million
Required: Prepare journal entries to record the above transactions from the date of acquisition of the plant to the
year ended 30 June 2014. (Ignore tax implications) (15)
{Autumn 2014, Q# 4, CAF-05}

Classwork:
1) Lecture 28 homework question (Shahzad Textiles Mills Limited) discussed;
2) Test 3 Q-1 (Chintoo Trans Lines) discussed:
Chintoo Trans Line (CTL) is a haulage contractor. At 1 May 2014 the company had three lorries,
details of which are as follows:
Lorry registration number Date purchased Cost Rs.000
BAHADUR 1 1 July 2011 16,000
CROSS 2 1 February 2013 21,000
DREAM 3 1 April 2014 31,000
Following further information is available for the year to 30 April 2015:

(a) CTL uses the straight-line method of depreciation and does not keep separate ledger
accounts for each individual lorry.
(b) The lorries are depreciated over a five-year period by which time they are assumed to have
a residual value of Rs.1 million each.
(c) BAHADUR 1 was sold on 31 July 2014 for Rs.3 million on cash terms. On 1 August 2014,
Chiniot Trucking Limited replaced it with a new lorry, registration number FLYING 4,
for which it paid Rs.35 million in cash.
(d) On 1 December 2014, the new lorry (FLYING 4) was involved in a major accident, and
as a result was completely written off. The company was able to agree a claim with its
insurance company, and on 31 December 2014 it received Rs.30 million from the
insurance company. On 1 January 2015 it bought another lorry (registration number
HOSHYAR 5) for Rs.41 million.
(e) During March 2015, CTL decided to exchange the lorry bought on 1 April 2014
(registration number DREAM 3) with a new lorry. It was delivered on 1 April 2015
(registration number JAZBATI 6). CTL agreed a purchase price of Rs.26 million for the
new lorry, the terms of which were Rs.20 million as part-exchange allowance for the old
lorry and the balance to be paid immediately in cash.
Required:
(a) Write up the following accounts for the year to 30 April 2015:
(i) Lorries account. (3.5)

(ii) Accumulated depreciation on lorries account. (08)

(iii) Lorries disposal account. (03)
(b) Show how the lorries account and the accumulated depreciation account would be presented in
CTL’s statement of financial position as at 30 April 2015. (1.5)
Classwork:
3) A simple class example discussed:
Example: 6 buildings were purchased on 1.1.15 for Rs. 660 million. Useful life of buildings is 30 years
and depreciation method is straight line. On 30.06.17, a building costing 66 million was sold for 85
million.
Required: Prepare asset a/c and accumulated depreciation a/c as on 31.12.17.
4) Year - end revaluation:
Q.1 Following information pertains to a building acquired by SK Limited (SKL) on 1 July 2012 for
Rs. 360 million:
(i) The building is being depreciated on straight-line basis over 10 years.
(ii) SKL uses revaluation model for subsequent measurement of buildings. It accounts for
revaluation on net replacement value method. The details of revaluations as carried out by
independent value are as follows:
Revaluation date Fair value (Rs. in million)
31 December 2013 323
(iii) There is no change in useful life of the building.
(iv) SKL transfers the maximum possible amount from the revaluation surplus to retained
earnings on an annual basis.
(v) SKL’s financial year ends on 31 December.
Required: Prepare entries to record revaluation surplus/loss on each of the above revaluation
date. (Entries to record depreciation expense, incremental depreciation and elimination of accumulated
depreciation are not required). (11)
{Spring 2018, Q # 6(a)}
Homework:
1. Revise Lecture 1 to 18 of IAS-16 (PPE).
2. Prepare ledgers of following questions:
i) Lecture 28 classwork question 1;
ii) Lecture 30 classwork question 1 (SKL).
Lecture 19&20 (IAS-16) Lecture 31&32(Overall)

Classwork:
Year - end revaluation:
Q.1 ABC Limited purchased a plant for Rs. 350,000 on 1 July 2010. The plant has an estimated useful life
of 20 years and no residual value.
ABC uses revaluation model for subsequent measurement of its property, plant and equipment and
accounts for revaluations on net replacement value method. The details of revaluations performed by
an independent firm of valuers are as follows:


30 June 2011 Rs. 475,000
30 June 2012 Rs. 390,000
30 June 2013 Rs. 380,000
Required:
a) Prepare journal entries to record the above transactions from the date of acquisition of the plant to
the year ended 30 June 2013. (16)
b) Prepare asset and accumulated depreciation account to record the above transactions from the date
of acquisition of the plant to the year ended 30 June 2013. (08)
c) Assume the plant was sold for Rs. 350,000 on 01 July, 2013. Prepare journal entry to be recorded
on disposal. (02)
Disposal of revalued assets:

Q.2 Moin purchased a plant for Rs. 300 million on 1 January 2010. The plant has an estimated
useful life of 10 years and no residual value.
1 January 2011 Rs. 500 million
The plant is sold for Rs. 750 million on March 31, 2011.
Required: Prepare journal entries to record the above transactions.
Q.3 Cost of asset = 700
Date of purchase = 01.01.2017
Useful life = 15 years.
It is revalued on 01.01.2018 at Rs. 1,000. This asset is disposed off on 31.05.2018 for Rs.
1,050.
Q.4 Umer Limited (UL) uses the revaluation model for subsequent measurement of its property,
plant and equipment and has a policy of revaluing its assets on an annual basis using the net
replacement value method.
The following information pertains to UL’s buildings:
(i) 10 buildings were acquired in same vicinity on 1 January 2015 at a cost of Rs.500
million. The useful life of the buildings on the date of acquisition was 10 years.
(ii) AL depreciates buildings on the straight line basis over their useful life.
(iii) The results of revaluations carried out during the last three years by Expert Valuation
Service, an independent firm of valuers, are as follows:
Fair value
Revaluation date
Rs. in million
1 January 2016 800
1 January 2017 300
1 January 2018 600
(iv) On 31 March 2018, 4 buildings were sold for Rs. 80 million each.
Required: Prepare a note on “Property, plant and equipment” (including comparative figures)
for inclusion in UL’s financial statements for the year ended 31 December 2018 in
accordance with International Financial Reporting Standards. (Ignore taxation) (13)
Homework:
1. Cost of asset = 500

Date of purchase = 01.01.2015

Useful life = 20 years
It is revalued on 01.01.2016 at Rs. 600. This asset is disposed off on 30.09.2016 for Rs. 450.
2. KL uses the revaluation model for subsequent measurement of its property, plant and equipment.
(i) 5 buildings were acquired in same vicinity on 1 January 2010 at a cost of Rs.200 million.
The useful life of the buildings on the date of acquisition was 20 years.
(ii) The results of revaluations carried out is as follows:
Revaluation date Fair value (Rs. in million)
1 January 2016 480
(iii) On 31 March 2016, 3 buildings were sold for Rs. 30 million each.
Required: Prepare a note on “Property, plant and equipment” for the year ended 31 December
2016 in accordance with International Financial Reporting Standards. (Ignore taxation) (6)
3. On 31 December 2018, Omega Chemicals Limited (OCL) changed its valuation model from cost to
revaluation for its buildings. The following information pertains to its buildings as at 31 December
2018:
Prior to revaluation as at 31-12-2018
Estimated useful Accumulated
Revalued
life as originally Cost depreciation*
amount
estimated
-------------------------Rs. In million ---------------------
Office buildings 20 Years 600 150 800
*Including depreciation for the year ended 31 December 2018
As per the report of the professional valuer, there was no change in estimated useful life of the buildings.
OCL recorded revaluation effect for the office buildings on 31 December 2018 as per the valuation
report.
On 1 April 2019, one of the office buildings was sold for Rs. 45 million. On 31 December 2018, written
down value before revaluation and revalued amount of the sold building amounted to Rs. 80 million
and Rs. 95 million respectively.
OCL uses straight line method of depreciation which is charged from the date the asset is available for
use upto the date of disposal. Revaluation is to be accounted for by using net replacement value method.
Required: In the light of the requirements of the International Financial Reporting Standards, prepare
accounting entries from the above information for the year ended 31 December 2019. (10)
Lecture 21&22 (IAS-16) Lecture 33&34 (Overall)

Fixed asset schedule / Note of PPE / Disclosure of PPE under IAS-16 (Property, Plant and equipment)
1) Prepared note of PPE using ledgers in the following example (without revaluation).
Plant and Machinery A/C

1.1.09 b/d 500,000 1.3.09 Disposal 190,000
1.5.09 Cash 90,000
1.9.09 Cash 120,000 31.12.09 c/d 520,000
Accumulated Depreciation – P and M A/C
Disposal 30,083 1.1.09 b/d 170,000

31.12.09 c/d 184,084 Depreciation Exp 44,167
Vehicle A/C
1.1.09 b/d 900,000 1.6.09 Disposal 40,000
31.12.09 c/d 860,000
Accumulated Dep. A/C – Vehicle
1.6.09 Disposal 11,000 1.1.09 b/d 300,000
31.12.09 c/d 376,667 Depreciation Exp 87,667
Required: Prepare a note of PPE / disclosure of PPE / fixed asset schedule from the above ledgers.
2) Prepared note of PPE using ledgers in the following example by students (without revaluation).
Machinery account – At cost
1.1.20X9 b/d 52,950 Disposal 2,800

1.3.20X9 Cash 2,480 31.12.X9 c/d 52,630
Machinery account – Accumulated depreciation a/c
Disposals 887 1.1.X9 b/d 28,350
31.12.X9 c/d 32,708 Depreciation 5,245
Office furniture account – At cost

1.1.20X9 b/d 2,860
1.3.20X9 Cash 320 31.12.X9 c/d 3,180
Office furniture account – Accumulated depreciation a/c
1.1.X9 b/d 1,490
31.12.X9 c/d 1,646 Depreciation 156
Required: Prepare a note of PPE / disclosure of PPE / fixed asset schedule from the above ledgers.
3) Prepare note of PPE in class work Q#1 (lecture 28); Q#1-SKL (lecture 30); Q#4-UL (lecture 31&32);
4) FAM had the following tangible fixed assets at 31 December 2014.

Cost Depreciation NBV
Rs. 000 Rs. 000 Rs. 000
Land 500 - 500
Buildings 400 80 320
Plant and machinery 1,613 458 1,155
Fixtures and fittings 390 140 250
Assets under construction 91 - 91
2,994 678 2,316
In the year ended 31 December 2015 the following transactions occur.
(1) Further costs of Rs.53,000 are incurred on buildings being constructed by the company. A
building costing Rs.100,000 is completed during the year.
(2) A deposit of Rs.20,000 is paid for a new computer system which is undelivered at the year
end.
(3) Additions to plant are Rs.154,000.

(4)Additions to fixtures, excluding the deposit on the new computer system, are Rs.40,000.
(5)The following assets are sold.
Depreciation
Cost Proceeds
brought forward
Rs. 000 Rs. 000 Rs. 000
Plant 277 195 86
Fixtures 41 31 2
(6) Land and buildings were revalued at 1 January 2015 to Rs. 1,500,000, of which land is worth
Rs. 900,000. The revaluation was performed by Messrs Jackson & Co, Chartered Surveyors,
on the basis of existing use value on the open market.
(7) The useful economic life of the buildings is unchanged. The buildings were purchased ten
years before the revaluation.
(8) Depreciation is provided on all assets in use at the year end at the following rates.
Buildings 2% per annum straight line
Plant 20% per annum straight line
Fixtures 25% per annum reducing balance
Required:
Show the disclosure under IAS 16 in relation to fixed assets in the notes to the published
accounts for the year ended 31 December 2015.
Homework:

Class work
1) Discussed sub-notes of ICAP question bank 6 (FAM) on page 108 of Crescent book;
2) Prepared note of change in estimate using a simple class example as follows:
Example:
We purchased an asset costing Rs. 120 on 1.1.15 having useful life of 4 years. On 1.1.17 it is estimated
that remaining life is 3 years.
Required: Prepare a note of change in estimate for the year ended 31.12.17.
3) Prepared note of change in estimate of question 44 on page 438 of Crescent book (Q1-Lecture 21 overall).
Home work
1. Prepare note of change in estimate of question 46; 47; 48 on page 438 of Crescent book;
2. Past paper 11 (Piano Limited);
3. Past paper 8 (Sherdil Limited).

Class work
Solved assessment 1 question 1 (Caribben Limited);
Home work
Assessment 1 question 2 (Mr. Abbasi);
Assessment 1 question 3 (MCQs);
Prepare note of change in estimate of question 46; 47; 48 on page 438 of Crescent book;
Past paper 11 (Piano Limited);
Past paper 8 (Sherdil Limited).


Mid of the year revaluation:
Usama Limited (UL) purchased a plant for Rs. 1,000 million on 1st January 2017. The plant has an
estimated useful life of 10 years and no residual value.
UL uses revaluation model for subsequent measurement of its property, plant and equipment and
accounts for revaluations on net replacement value method. The details of revaluations performed by an
independent firm of valuers are as follows:
1st April,2017 Rs. 1,080 million
Required:
Prepare journal entries and note on “Property, plant and equipment” for inclusion in UL’s financial
statements for the year ended 31 December 2017 in accordance with International Financial Reporting
Standards. (Ignore taxation)
Understanding ‘fully depreciated asset’ concept using following question:
Asif has provided you with following data:
Accumulated
Cost as on
Depreciation
1.1.07 1.1.07
Vehicle 600,000 250,000
Following is the breakup of above Assets:

Purchased on 1.7.02 150,000
600,000
- Life of all assets is 5 years.
- Additions made during year ended amounted to Rs. 90,000 as on 1.Mar.07.
- An asset having cost of Rs. 70,000 on 1.1.06 is disposed of on 31.3.07 for Rs. 30,000.
Required: Prepare relevant accounts for year ended Dec. 31, 2007; 2008 and 2009.
Gross replacement method of revaluation: This method involves restating proportionally the cost account
and the accumulated depreciation so that the net carrying amount equals the net replacement value (fair
value).
Example
A Hydroelectric power plant owned by a company is carried at Rs. 30 million (Cost of Rs. 40 million less
accumulated depreciation of Rs. 10 million. The company’s policy is to apply the revaluation model to
all of its property, plant and equipment. A current valuation (fair value / revalued amount) of this plant
is now Rs. 50 million.
Required: Pass journal entry of revaluation using
i) Net replacement method (Eliminate)
ii) Gross replacement method (Restate proportionately).
Revaluation under reducing balance method:
A plant was purchased on July 1, 2014 for Rs. 500 million. It had an estimated useful life of 8 years
with residual value of Rs. 1 million. Initially it was decided to depreciate this plant at 54% on reducing
balance basis. It was revalued as follows:
Date Fair value (Rs. in
millions)
1/7/2016 90
1/7/2018 50
Required:
Pass journal entries for the year ended June 30, 2019.
1-Self-constructed asset (example of Crescent book)
2-Parts of an asset, Determination of cost, Commencement of depreciation (example of Crescent book)


Class work
Assessment 1 Q-3(c)MCQ;
Mid of the year revaluation:
Usama Limited (UL) purchased a plant for Rs. 1,000 million on 1st January 2017. The plant has an estimated
useful life of 10 years and no residual value.
UL uses revaluation model for subsequent measurement of its property, plant and equipment and accounts for
revaluations on net replacement value method. The details of revaluations performed by an independent firm
of valuers are as follows:
1st April,2017 Rs. 1,080 million
Required:
Prepare journal entries and note on “Property, plant and equipment” for inclusion in UL’s financial statements
for the year ended 31 December 2017 in accordance with International Financial Reporting Standards. (Ignore
taxation)
Homework
1. Prepare note of PPE in question 68 (Umer Limited) on page 445 of Crescent book;
2. Prepare note of PPE in question 69 (KL) on page 446 of Crescent book.
(IAS-36)
Class work
Started discussion on IAS-36 and discussed concept of testing an asset for impairment using a simple class example as
follows:
Example
1. Following detail relate to Daewoo bus of Nabeel:
Cost (1.1.20) 200
Useful life 5 years
2. On 31.12.21 a competitor came in the market and it is appropriate for Nabeel to test his Bus for
impairment. Following relevant data in this regard is given as at 31.12.21:
Fair value 95
Cost to sell 5
Annual cash inflows for remaining 3 years 65
Annual cash outflows for remaining 3 years 20
Sale proceeds of selling asset at the end of 3 years (i.e. useful life) 10
Disposal cost at the end of 3 years (i.e. useful life) 2
3. Discount rate is 15%.
Requirement
a) Calculate impairment loss (if any) as on 31.12.21;
b) Prepare a note of Property, plant and equipment as on 31.12.21.
Homework
Revision of class work.

Class work
1) Discussed concept of fully depreciated asset and solved question 72 on page 447 of Crescent book

Homework

Class work
1) Revision of class example solved in lecture 38;
2) Solved question 1 on page 448 of Crescent book.
Homework
Question 2 on page 448 of Crescent book.
Class work
1) Prepared note of PPE in question 68 on page 445 of Crescent book;
Homework

Class work
1 Discussed question 2 on page 448 of Crescent book.
Homework
Practice set 1-6 on page 317 and 318 of Crescent book.

Class work
1) Prepared note of PPE in question 69 on page 446 of Crescent book;
2) Solved question 74 on page 447 of Crescent book.
Homework

Class work
Solved question 2 on page 448 of Crescent book
Homework
Lecture 5(IAS-36) Lecture 42 (Overall)

Class work
Solved question 1 of test 4 (Omega Limited)
Homework
Question 1 of test 4 (Omega Limited)

Class work
1) Solved question 2 (again) on page 448 of Crescent book;
2) Discussed definitions and scope para on page 311 of Crescent book;
3) Explained indicators of impairment (internal and external) on page 311 of Crescent book;
4) Discussed fair value and cost to sell on page 311 of Crescent book;
5) Started solving example 3 on page 313 page 313 of Crescent book.
Homework
1. Past paper 1 (Dominant Fertilizers);
2. Past paper 2 (Barbary Cement Limited).

Class work
1. Completed example 3 on page 313 of Crescent book;
A company purchased a machine costing Rs. 1,800 on 1 January 20X3. It has a life of 8 years. The
fair value as on 31 December 20X5 is as follows:
Fair value Incremental selling cost
Machine 800 20
Following future cash flows data is available based on management’s most recently approved budgets:
20X6 20X7 20X8
Outflows:
Maintenance costs 100 120 80
Operational costs (electricity, water, labour etc.) 200(N-1) 220 240
Interest on loan payments 10 8 6
Principal payments on loan 100 100 100
Tax payments on profits 16 20 28
Cost of increasing the machine’s capaci 0 220 0
Overhauling cost 0 30 0
Depreciation 156 211 211
Inflows:
Basic inflows 400(N-2) 480 560
Extra profits resulting from the upgrade 0 20 50
(N-1) It includes payment of expenses of Rs. 30 to be paid in respect of 20X5 accruals
(N-2) It includes debtors of Rs. 20 to be received from credit sale recorded in 20X5
The useful life of the machine is expected to last for 5 years. The growth rate in the business in 20X5
was an unusual 15% whereas the average growth rate over the last 7 years is:
In the industry 10%
In the business 8%
Discount factor for similar asset is 10%.

Required: Calculate impairment loss at 31 December 20X5 assuming that a 5-year projection is
considered to be appropriate.
1. Future cash flows in value in use discussion on page 313 of Crescent book;
2. Discussed past paper 1 (Dominant Fertilizers) and Past paper 2 (Barbary Cement Limited);
3. Solved question 3 on page 449 of Crescent book;
4. Solved question 73 on page 447 of Crescent book.
Homework
(IAS-16) Lecture 45 (Overall)

Class work
1. Discussed concept of gross replacement method of revaluation and solved question 73 on page
447 of Crescent book;
2. Discussed concept of frequency of revaluation on page 24 of Crescent book;
3. Discussed disclosures of IAS-16 on page 24 of Crescent book.
Homework
MCQ 4; 13; 14; 15; 23;

Class work
1. Discussed past paper 4 (Barbary Cement Limited);
2. Discussed MCQ 1; 2; 3; 5; 6; 10; 13; 15; 26.
Homework
MCQ 1; 2; 3; 5; 6; 10; 13; 15; 20; 21; 22; 23; 25; 26; 28; 29; 31; 34; 35.
(Accrual basis of accounting)

Lecture 1 (Accrual basis of accounting) Lecture 45 (Overall)
Class work
Started discussion on expenses in accrual basis of accounting and solved question 1 on page 450 of
Crescent book;
Homework
Question 1; 2 and 3 on page 450 of Crescent book.

Class work
Discussed MCQ 4; 13; 14; 15; 16 and 23 on page 135 and 138 of Crescent book.
Homework
1. All MCQs (IAS-16);
2. All MCQs (IAS-36).

Class work
1) Discussed the concept of opening payable; closing payable; opening prepaid; closing prepaid
and also written steps of solving accrual questions;
2) Solved question 2 and 3 on page 450 of Crescent book;
3) Discussed 2 types of trials using a simple class example.
Homework
Question 5 to 11 on page 450 to 452 of Crescent book.

Class work
1) Solved question 4 to 11 on page 450 and 451 of Crescent book;
2) Started discussion on income in accrual basis of accounting.
Homework
Question 12 To 17 on page 451 of Crescent book.

Classwork:
2. Solved basic practice question 4 on page 248 of Crescent book;
3. Solved basic practice question 5 on page 249 of Crescent book;
4. Discussed routine and non-routine suspension using following class examples:
Class example 5A (not in Crescent book)
Assuming all other data is same as basic practice question 5 on page 248 of Crescent book, but construction
work was suspended for 10 days during November 2016 due to cement being cured (strengthened).
Class example 5B (not in Crescent book)
Assuming all other data is same as basic practice question 5 on page 248 of Crescent book but construction
work was suspended for the whole month of December 2016 due to labor strike;
non-availability of raw material; heavy rain etc.
Homework:
Question 2 and 3 on page 457 of crescent book;

Classwork:
1. Revision of routine and non-routine suspension from previous lecture;
2. Discussed concept of general loans;
3. Discussed average capitalization rate and solved question 6 and 7 on page 249 of Crescent book;
4. Solved practice question 17 on page 260 of Crescent book;
Homework:
Revise all class work.

Classwork:
Solved past paper 5 (Spin Industries) on page 278 of Crescent book.

Homework:
Past paper 7 (Granite Corporation) on page 279 of Crescent book.

Classwork:
1. Solved question 1 and question 2 (a & b) of test 5;
2. Solved past paper 7 on page 279 of Crescent book;
3. Discuss the concept of issuance right shares;
Homework:
1. Past paper 1(Imran limited) on page 276 of crescent book;
2. Question bank question 1 and 2 on page 286 of Crescent book;

Classwork:
1. Discuss past paper 7(Granite corporation) on page 279 of Crescent book;
2. Discuss test 6;
3. Discuss the concept of progress billing.
Homework:
1. Past paper 4(Alpha trading limited) on page 277 of crescent book;
2. All MCQS of IAS-23 on page 290 of Crescent book.

Classwork:
Homework:
1. Past paper 4 on page 277 of Crescent book;
Lecture 8 (Borrowing cost IAS-23) Lecture 56(Overall)

Classwork:
1. Discuss past paper 4 (Alpha Trading Limited) on page 277 of Crescent book;
2. Discussion of debt and equity.
Homework:
1. MCQS 4,5,9,12,13,15 on page 290 of Crescent book;
(Government grant)
Lecture 1 (Government grant) Lecture 56(Overall)
Classwork:
1. Discuss the concept of government grant and solved question 1 and 2 on page 459 of Crescent
book;

Homework:
1. Example 1 and 2 on page 214 of Crescent book;
2. Example 3 and 4 on page 215 and 216 of Crescent book.

Classwork:
1. Solved question 4 (Basit limited) on page 223 of Crescent book;
3. Discussion of non-monetary grant and forgivable loan.
Homework:
1. Past paper 4 (Bunny ear limited) on page 232 of Crescent book;
2. Example 5 and 6 on page 218 and 219 of Crescent book.

Classwork:
1. Solved past paper 4 (Bunny ear limited) on page 232 of Crescent book;
Homework:
1. Past paper 1,2 and 3 on page 231 and 232 of Crescent book;
(IAS-40)
Classwork:
1. Discuss the concept of investment property and subsequent measurement of investment
property under cost model and fair value model;
Homework:
1. Question 3 (snake limited) on page 458 of Crescent book.

Classwork:
2. Solved question 3 (snake limited) on page 458 of Crescent book;
Homework:
1. Past paper 13 of IAS-16 on page 80 of Crescent book.

Classwork:
1. Solved question 3 of term test;
2. Discuss question 4 of term test;
3. Discuss question 1 of term test.

Homework:
1. Solved question 4 of term test;
2. MCQS of term test;
3. Question 1 of term test.

Classwork:
1. Discuss term test MCQS;
2. Solved past paper 13 of IAS-16 on page 80 of Crescent book.

Classwork:
1. Discuss investment property disclosures;
Lecture 1 (Correction of errors) Lecture 63 (overall)

Classwork:
1. Discuss the concept of rectification of fixed asset, depreciation and exchange of fixed asset.
2. Solved example 6 on page 152 of Crescent book.
Homework:
1. Example 4,5,7 and 8 on page 152 and 153 of Crescent book.

Classwork:
1. Discuss example 8 on page 155 of Crescent book;
2. Discuss the concept of inventory card under FIFO and AVCO method and solved question 1 on
page 460 of Crescent book.
Homework:
1. Revise class lecture.

Classwork:
1. Solved example 4,5,7 and 8 on page 152,153,154 and 155 of Crescent book;
2. Discuss the concept of periodic and perpetual system of inventory and also explain their journal
entries.
Homework:
1. Question 2 on page 460 of Crescent book.

Classwork:
1. Solved question 1 and 2 on page 460 of Crescent book;
2. Discuss the concept of NRV.

Homework:
1. Question 4 and 5 on page 461 of Crescent book.
2. Revise class work.

Classwork:
2. Discuss the concept of trade discount and solved the requirement 2 of question 6 on page 461
of Crescent book;
3. Discuss the concept Bad doubtful debts and Solved scenario 1 and 2 on page 462 of Crescent
book;
4. Solved question 7 and 8 on page 461 of Crescent book.
Homework:
2. Past paper 16 on page 174 of Crescent book.

Classwork:
1. Discuss the concept of discount in the books of buyer and seller and solved question 6 on page
461 of Crescent book;
2. Discuss the concept of suspension account and solved of example 1 on page 149 of Crescent
book;
3. Discuss the types of errors on page 147 of Crescent book;
4. Solved past paper 13 on page 172 of Crescent book.
Homework:
4. Example 2 and 3 on page 150 and 152 of Crescent book;

Classwork:
1. Discuss adjustment (v) of past paper 13 on page 172 of Crescent book;
2. Solved past paper 16 requirement (a) on page 174 of Crescent book.
Homework:
1. Past paper 16 requirement (b) on page 174 of Crescent book;

Classwork:
1. Discuss requirement (b) of past paper 16 on page 174 of Crescent book;
2. Solved past paper 14 on page 172 of Crescent book.
Homework:

(Statement of changes in equity)

Lecture 1 (Statement of changes in equity) Lecture 70 (overall)
Classwork:
1. Starting the discussion of statement of changes in equity and solved question 1on page 464 of
Crescent book.

Classwork:
1. Discuss of past paper 14 on page 172 of Crescent book;
2. Discuss the concept of markup and margin and solved question 1,2 and 3 on page 462 of
Crescent book.
Homework:
2. Question 2,4 and 5 on page 462 of Crescent book.

Classwork:
1. Discuss the concept of dividend and types of dividend.

Classwork:
Homework:

Classwork:
2. Revise the concept of dividend.
Homework:
1. Question 1 on page 464 of Crescent book.

Classwork:
1. Explain the concept of revaluation surplus in statement of changes in equity with the help of following
question:

Q.1)
Asset purchased on 1-01-12
Cost of asset 500
Useful life 20 years
Revaluation Details:
01-01-14 800
01-01-16 250
01-01-18 600
Required: Prepare Journal entries from 2012 to 2018.
Homework:
1. Past paper 1 and 2 on page 358 of Crescent book.

Classwork:
1. Soled past paper 1 and 2 on page 358 of Crescent book.
Homework:
1. Question bank 1,2,3,4,5 and 6 on page 362,363,364 and 365 of Crescent book.
(IAS-8)
Classwork:
1. Started IAS-8 and solved practice question 1 on page 351 of Crescent book.
Homework:
1. Solve practice question 1 (2 times)

Classwork:
1. Discuss practice question 1 on page 381 of Crescent book;
2. Discuss the concept of impact of change in policy on retained earning with the help of accounting
equation;
3. Solved question bank 1 on page 399 of Crescent book.
Homework:
1. Past paper 1 and 2 on page 393 and 394 of Crescent book.

Classwork:
2. Revise previous class concepts;
3. Discuss the adjustment (3) of past paper 3 on page 395 of Crescent book.
Homework:
1. Question bank 6 and 7 on page 401 of Crescent book.

Classwork:
1. Solved question bank 2 on page 400 of Crescent book;
Homework:

Classwork
Homework:
1. Adjustment 8 of past paper 15 on page 150 of Crescent book.
(Statement of cash flows)

Lecture 1 (Statement of cash flows) Lecture 80 (overall)
Classwork:
1. Solved ICAP Past paper question 4 (Junaid Janjua):
Homework:

Classwork:
1. Solved question bank 6 (Asif engineering) on page 401 of Crescent book.
Homework:

Classwork:
1. Solved past paper 5 (ameen industries) on page 401 of Crescent book.
Homework:

Classwork:
1. Solved ICAP past paper 11 (quality enter praises) :
Homework:

Classwork:
1. Solved ICAP past paper 8 (AB enter praises)
Homework:

Classwork:

1. Solved following past paper 12 (Liaqat industries)

Homework:

Classwork:
1. Solved past paper 13 (Nadir limited) on page 610 of Crescent book.
Homework:
Lecture 7(Statement of cash flows) Lecture 87 (overall)

Classwork:
1. Solved past paper 4 by direct method on page 604 of Crescent book.
2. Discuss past paper 17 on page 611 of Crescent book.
Homework:
1. Past paper 4 by direct method on page 604 of Crescent book;

Classwork:
1. Solved past paper 15 (Nadir limited) on page 612 of Crescent book;
Homework:
1. Question bank 10 on page 653 of Crescent book;
2. Question bank 8 on page 653 of Crescent book.

Classwork:
2. Discuss past paper 2 (Chand limited) on page 394 of Crescent book.
Homework:
1. Past pape 2 on page 394 of Crescent book;
2. Question bank 7 on page 401 of Crescent book.

Classwork:
2. Discuss the theory of IAS-08.
Homework:
1. Past paper 9 (Galaxy’s brothers) of cash flows on page 607 of Crescent book;
2. All MCQS of IAS-08;
3. Read the theory of IAS-08.
Lecture 1 (Income and Expenditure) Lecture 90 (overall)
Classwork:
1. Starting the concept of income and expenditure and solved past paper 3 on page 856 of Crescent
book;
2. Discuss question 3 of term test 2.

Homework:

Classwork:
1. solved past paper 8 on page 860 of Crescent book;
2. Discuss the concept of prior period errors;
3. Discuss MCQS of IAS-08 from MCQ 1 TO 13 on page 912 of Crescent book.
Homework:

Classwork:
1. solved past paper 9 on page 861 of Crescent book;
2. Solved question 1 of term test 2;
3. Discuss the concept of change in accounting estimate on page 378 of Crescent book.
Homework:

Classwork:
Homework:

Classwork:
Homework:
1. All MCQS of cash flows on page 672 of Crescent book.

Classwork:
2. Discuss the concept of general donation and specific donation.
Homework:
1. All MCQS of cash flows on page 672 of Crescent book;
2. Theory of NPO.
(IAS-33)
Classwork:
1. Starting the discussion of earning per share and Solved question 1,2 and 3 on page 939 of Crescent
book;

2. Solve question 37 on page 511 of Crescent book;

3. Discuss the concept of earning per share in case of discontinued business;
4. Discuss MCQ 17 and 18 of IAS-08.
Homework:
1. Example 1,2 and 3 on page 469 and 470 of Crescent book;
2. Question 38 on page 511
3. Practice question 1 on page 518 of Crescent book;
4. All MCQS of cash flows.

Classwork:
1. Discuss the concept of share issue;
2. Solve question 4,5 and 6 on page 939 of Crescent book;
3. Discuss question 3 of term test 2;
4. Discuss the theory of IAS-07;
5. Discuss the concept of gratuity and warranty.
Homework:
1. Example 1 to 17 on page 474 of Crescent book;
2. Example 28 to 35 on page 502 of Crescent book;
3. Question 7 on page 940 of Crescent book;
4. MCQ 19,20.37 and 39 of IAS-07.

Classwork:
1. Discuss the concept right issue;
4. Solve following question in class;
5. Discuss MCQS of cash flows.
Homework:
1. Questions from 19 to 27 on page 490 of Crescent book.

Classwork:
1. Discuss the concept of preference shares, debentures and share certificate;
Homework:
1. Question 9 and 10 on page 940 and 941 of Crescent book;
4. All MCQS of earning per share.

(Ratios)
Lecture 1 (Ratios) Lecture 100 (overall)
Classwork:
1. Discuss following ratios;
1. Capital employed.
2. Return on capital employed.
3. Return on ordinary equity.
4. Return on asset.
5. Asset turn over.
6. Debtor days.
7. Inventory days.
8. Creditor days.
9. Cash operating cycle.
10. Debtor turnover.
11. Inventory turnover.
12. Creditor turnover.
13. Current ratio.
14. Quick ratio.
15. Debt/equity ratio.
16. Net profit ratio.
17. Gross profit ratio.
18. Expense ratio.
3. Solve question 2 on page 710 of Crescent book.
Homework:
1. Past paper 1(a) on page 749 of Crescent book;
3. Past paper 4 and 6 on page 751 of Crescent book.

Classwork:
1. Discuss the theory of following concepts;
1. Ratios;
2. Percentage growth in sale;
3. Price and earnings ratios;
4. Horizontal analysis;
5. Vertical analysis;
6. Limitations of ratios analysis;
7. Window dressing.
3. Solve past paper 1 on page 749 of Crescent book;
4. Solve past paper 3 and 4 on page 749 and 750 of Crescent book;
5. Solve past paper 6 on page 751 of Crescent book;
6. Discuss the MCQS of ratios.
Homework:


3. All MCQS of ratios.

Classwork:
1. Discuss the theory of following concepts;
1. LO:1 of ratio theory;
2. NPO theory;
3. Types of funds (endowment fund, restricted fund, unrestricted fund);
4. LO:7 OF NPO;
5. Revenue recognition;
6. Contribution receivable;
7. Pledge;
8. Bequest/legacy;
9. Member ship fee.
2. Discuss past paper 8 and 9 on page 753 of Crescent book;
3. Solve example on page 798 of Crescent book;
4. Discuss the concept of components cost and solve example 1 on page 10 of Crescent book;
Homework:
5. Example on page 792 of Crescent book;
6. Example of member ship fee on page 794 of Crescent book.

Classwork:
1. Discuss the concept of sum of year digit method of IAS-16;
2. Solve example on page 9 of Crescent book;
3. Discuss past paper 14 on page 81 of Crescent book;
4. Discuss question 16 on page 83 of Crescent book;

Classwork:
1. Discuss the concept of reversal of impairment of fixed assets under cost and revaluation model;
2. Solve self-made question 1 and question 2.
Homework:
1. Following Question 1 of test 3;
Q.1
1. A plant was purchased on 1 January 2022 for Rs. 200,000.
2. The plant is measured under the revaluation model and was revalued to its fair value of Rs. 270,000 on
I January 2023.
3. The asset's recoverable amount decreased to’ Rs. 70,000 at 31 December 2024 due to a decrease
in demand for the product produced by this plant.
4. The plant is depreciated straight-line to a nil residual value over 10 years.

5. The revaluation surplus is transferred to retained earnings over the asset’s useful life.
Required:
Show the journal entries assuming that:
(a) The asset's recoverable amount increased to Rs. 160,000 at. 31 December 2025; (4)
(b) The assets recoverable amount increased to Rs. 210,000 at31December2025; (4)
Lecture (Revision classes) Lecture 104 (overall)

Classwork:
1. Solved question 8 (Chand limited) of recent attempt;
2. Solved question 7 (Qamar limited) of recent attempt;
3. Discuss the theory of SOCIE;
4. Discuss question 3 (madhab limited) of recent attempt;
5. Discuss donation to purchase and contract fixed assets.
Homework:
1. MCQS OF IAS-16, IAS-36, IAS-23, IAS-20, IAS-40;
2. QUESTION 3 Mehtab limited.
Lecture (Revision classes) Lecture # 105 – Pre (Over All)

Classwork:
Question-1
Following information have been extracted from the financial statements of Fakhr Limited (FL) for
the year ended 31 December 2019:
(i) 2019 2018 2017
Draft Audited Audited
--------- Rs. in million ---------
Net profit 84 98 72
Revaluation surplus arising during the year* 25 (14) -
*Transfer to retained earnings is made upon de-recognition of related asset.

(ii) Share capital and reserves as at 1 January:
2018 2017
----- Rs. in million -----
Share capital (Rs. 10 each) 300 300
Revaluation surplus 102 102
Retained earnings 348 276
(iii) On 1 March 2018, FL declared a final cash dividend of 10% for the year ended 31 December
2017. On 1 November 2018, FL issued 40% right shares to its ordinary shareholders at Rs. 24
per share. On 1 August 2019, an interim bonus of 15% was declared.
Following matters need to be incorporated in the draft financial statements of FL:

(i) To provide more relevant and reliable information about investment property, it has been
decided to change the measurement basis for investment property from cost model to fair value
model.
The only investment property of FL is a building purchased on 1 January 2016 at a cost of Rs.
150 million. 60% of the cost represents building component having estimated useful life of 20
years and residual value of Rs. 10 million. The depreciation is included in the above draft

financial statements. The fair value of the investment property has increased by 6% in each year
since acquisition.
Required:
Prepare FL’s statement of changes in equity (including comparative figures) for the year ended 31
December 2019. (‘Total’ column is not require
Question-2
Following is the trial balance of Mahtab Welfare Hospital (MWH) as on 31 December 2021:
Debit Credit
---- Rs. in million ----
Capital work in progress – hospital building 335
Cash at bank 125
Closing inventory – medicines and supplies 14
Contributions received 281
General fund as at 1 January 2021 332
Medical equipment 320 100
Medicines and supplies used 76
Other expenditures 19
Payables 17
Research cost 33
Restricted fund as at 1 January 2021 230
Salaries 53
Other income 15
Total 975 975
Additional information:
(i) The break-up of restricted fund balance is as follows:
Fund Description Rs. in million

Hospital building
Contributions received for the construction of
120
Fund hospital building.
As per the resolution of board of trustees,
Research fund MWH is required to allocate 20% of surplus 60
of each year to the research fund.
Endowment fund Contribution received for endowment fund 50
(ii) Contributions received include Rs. 55 million and 26 million received for construction of hospital
and endowment fund respectively.
(iii) The other income includes investment income of Rs. 6 million which is externally restricted to be
added to principal amount of Endowment fund. There is no other restrictions on other income.
(iv) During the year, MWH also received construction materials having fair value ofRs. 65
million for the hospital building which has not been recorded in books.
(v) MWH has completed the construction of hospital building on 1 April 2021.
(vi) Depreciation is to be charged as follows:
Hospital building 5% – straight line
Other fixed assets 10% – reducing balance
Requirement 1:
Prepare the following using deferral method:
(a) Statement of income and expenditure for the year ended 31 December 2021;
(b) Statement of changes in net assets;
(c) Statement of financial position as at 31 December 2021 (single column);

Requirement 2:
Prepare the following using restricted fund method:
(a) Statement of income and expenditure for the year ended 31 December 2021;
(b) Statement of changes in net assets;
(c) Statement of financial position as at 31 December 2021 (single column);
Homework
1. Revise class work;
Lecture (Revision classes) Lecture # 106 – Pre (Over All)
Classwork:
Question 1
The following information relates to Miles Limited for the year ended 31 December 2011:
Milles Limited
Draft result of operations
2011 2010
Profit before tax 503,000 403,000
Income tax expense (200,000) (180,000)
Profit after tax 303,000 223,000
Preference dividends declared (3,000) (3,000)
Ordinary dividend declared (30,000) (30,000)
Retained earnings for the year 270,000 190,000
Additional Information
The balances in equity at 1 January' 2010 comprised:
• 1,000,000 ordinary shares of 0.20 each;
• 10,000 10% non-cumulative non-redeemable preference shares of 3 each;
• Share premium of 290,000; and
• Retained earnings of 60,000.
In terms of an agreement with the bank the company has undertaken to have a capitalization issue in
order to capitalize excess reserves. In accordance with this agreement, there was a capitalization issue of
1 for every 2 shares held on 1 July 2011.
Required:
Prepare extracts from the statement of comprehensive income, and related notes of Miles Limited in
terms of International Financial Reporting Standards for the year ended 31 December 2011.
Comparatives are required
Homework
Question 14
The following relates to Early Morning Limited for the year ended 31 December 2015:
1. Profit for the year Rs.500,000 (2014: Rs.337,500). This profit includes a profit from a

discontinued operation (after tax) of Rs.52,500 (2014: Rs.0).

2. On 1 January 2014 there were 250 000 ordinary shares each with a par value of Rs.5.00 in issue.
On the 30 September 2014 there was a rights issue on a basis of 1 ordinary share issued for every5
already held at a price of Rs.6.00 The market value of the ordinary shares immediately before the
rights issue was Rs.7.50 per share. On 31 May 2015 there was an issue of 50,000 ordinary shares
at market price (Rs.5 per share).
3. There are 25,000 options in existence, each of which allows the holder to acquire four shares at a
strike price of Rs.10.00 per share. The average market price per ordinary share for 2014 and 2015
was 12.00. These options were in existence throughout 2014 and 2015.
4. Preference shares in issue are convertible (at the option of the preference shareholders) into 500
ordinary shares on 31 December 2017. If not converted, the preference shares will be redeemed
on 31 December 2017. 245 Page 10 of 11 Dividends of Rs. 1,000 are incurred annually on these
preference shares (these have been correctly accounted for as finance charges). The preference
shares were in existence throughout 2014 and 2015.Ignore tax.
Required:
Disclose earnings per share in the financial statements of Early Morning Limited for the year ended31
December 2015. (With comparatives)

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CAF-01: FAR-I (Pre Batch) Over All Lecture Notes

Lecture 2 (IAS-16) Lecture 14 (overall)

Umair Sheraz Utra, ACA. Page |1

- Asset-1 1.1.2009 30,000

Umair Sheraz Utra, ACA. Page |2

1.1.11 b/d 28,125

Dr. Accumulated Depreciation a/c Cr.

Umair Sheraz Utra, ACA. Page |3

Dr. Accumulated Depreciation Cr.

Depreciation for 2014

Lecture 3 (IAS-16) Lecture 15 (overall)

Umair Sheraz Utra, ACA. Page |4

Dr. Accumulated Depreciation a/c Cr.

Lecture 4 (IAS-16) Lecture 16 (overall)

Umair Sheraz Utra, ACA. Page |5

Asset A/C 50,000

2. The following detail is provided by Mr. Aamir on 1.1.2007

Description Date of Purchase Date of Disposal Cost Sale proceeds

Umair Sheraz Utra, ACA. Page |6

Lecture 5 (IAS-16) Lecture 17 (overall)

Umair Sheraz Utra, ACA. Page |7

Umair Sheraz Utra, ACA. Page |8

Asset-3 1.4.2010 50,000

Umair Sheraz Utra, ACA. Page |9

Machinery B 1.3.2009 10,000

Umair Sheraz Utra, ACA. P a g e | 10

Machinery 600,000 200,000

- An asset costing Rs. 70,000 is purchased on 1.4.2013.

Lecture 6 (IAS-16 Solution ) Lecture 18 (overall)

Umair Sheraz Utra, ACA. P a g e | 11

1.1.20X9 b/d 94,500 Disposal 1,600

Dr. Machinery account – Accumulated depreciation a/c Cr.

Dr. Office furniture account – At cost Cr.

Dr. Office furniture account – Accumulated depreciation a/c Cr.

(W-2) Accumulated depreciation of disposals of machinery

(W-3) Depreciation - office furniture

Dr. Accumulated Depreciation Cr.

Umair Sheraz Utra, ACA. P a g e | 12

- On disposals (90,000  10%  6/12) 4,500

Dr. Machinery account – Accumulated depreciation a/c Cr.

Dr. Office furniture account – At cost Cr.

Dr. Office furniture account – Accumulated depreciation a/c Cr.

Umair Sheraz Utra, ACA. P a g e | 13

3. Started discussion Exchange of Assets.

Dr. Accumulated depreciation a/c Cr.

Dr. Disposal A/C Cr.

Umair Sheraz Utra, ACA. P a g e | 14

(W-2) Accumulated depreciation of disposals of machinery

Lecture 8 (IAS-16) Lecture 20 (overall)

1. The following information is available in respect of machines of Akmal Brothers:

Umair Sheraz Utra, ACA. P a g e | 15

Machine Account – Cost

Accumulated Depreciation Account

Umair Sheraz Utra, ACA. P a g e | 16

30-6-17 Disposal (W-3) 15,810 31-12-17 Depreciation(W- 71,868

Umair Sheraz Utra, ACA. P a g e | 17

31-12-15 Depreciation 65,000  15%  3/12 (2,438)

Particulars Dr. Cr.