IAS-16 Excell Notes
Cost Model
- Initial recognition
- Journal Entries
- T Accouts
- Extracts
Initial recognition of PPE
Cost
1 Purchase Price 20,000 Cash Dismentling Cost
2 Carriage Cost 5,000 Cash useful life of asset
3 Installation Cost 12,000 Credit Discount factor
4 Site Preparation 10,000 Credit
5 Other directly attributable Cost 2,500 Cash Calculate PV of Disment
6 PV of Dismentling Cost 38554.33 Provision
7 Borrowing Cost 0 PV of Dismenling Cost
8 Initial testing Cost 0
88,054
Cost of Asset 88,054
Useful life of asset 10 years
Residual value of asset 10,000
Depreciation rate 10%
Find Depreciable Value 7805.432894
Depreciabale Value 78,054
Find Depreciation For year 1 and year 2 using:
Yr1 Yr2
- Straight Line method 7805.433 7805.433
- Reducing balance method 8805.433 7924.89
Pass journal Entries for year 1 and also prepare Extract of F/S
Journal entry at the start of the year
Journal Entry
Asset 88,054
Cash 27,500
Payables 22,000
Dismentling Prov 38554.33
Journal Entry at End of the year 1
1 Recording of depreciation for the year
Depreciation Exp 7805.433
Accmulated Depreciation 7805.4329
2 unwinding of Discount
Finance Cost or Interest Exp 3855.433
Provision for Dismentling 3855.4329
Extracts of Financial Statements for the year 1
Extract-SOCI
Depreciation Exp 7805.4329
Intrest Expense or Finance Cost 3855.4329
Total Expense 11660.866
Extract-SOFP
Asset 80,249
Liability
Dismentling Provision 42410
Pass journal Entries for year 2 and also prepare Extract of F/S
Journal Entry at End of the year 2
1 Recording of depreciation for the year
Depreciation Exp 7805.433
Accmulated Depreciation 7805.4329
2 unwinding of Discount
Finance Cost or Interest Exp 4240.976
Provision for Dismentling 4240.9762
Extracts of Financial Statements for the year 2
Extract-SOCI
Depreciation Exp 7805.4329
Intrest Expense or Finance Cost 4240.9762
Total Expense 12046.409
Extract-SOFP
Asset 72,443
Liability
Dismentling Provision 46651
Pass journal Entries for year 3 and also prepare Extract of F/S
Journal Entry at End of the year 3
1 Recording of depreciation for the year
Depreciation Exp 7805.433
Accmulated Depreciation 7805.4329
2 unwinding of Discount
Finance Cost or Interest Exp 4665.074
Provision for Dismentling 4665.0738
Extracts of Financial Statements for the year 3
Extract-SOCI
Depreciation Exp 7805.4329
Intrest Expense or Finance Cost 4665.0738
Total Expense 12470.507
Extract-SOFP
Asset 64,638
Liability
Dismentling Provision 51316
Dismentling Cost 100,000
useful life of asset 10 years
Discount factor 10%
Calculate PV of Dismentling Cost?
PV of Dismenling Cost 38554.33
Prepare T accounts for the year 1
Asset - Cost Dismentling Provision
Op bal. 0 0
Purchase 88,054 38554.33
3855.433
88,054 Cl bal. Cl bal. 42409.76
Prepare T accounts for the year
Asset - Cost Dismentling Provision
Op bal. 88,054
Purchase 0
88,054 Cl bal. Cl bal. 46650.74
Prepare T accounts for the year
Asset - Cost Dismentling Provision
Op bal. 88,054
Purchase 0
88,054 Cl bal. Cl bal. 51315.81
nts for the year 1
ng Provision Accmulated Dep
Op provision 0 Op
7805.433 Dep Exp
[Link] 7805.433
are T accounts for the year 2
Dismentling Provision Accmulated Dep
42409.76 Op provision 7805.433 Op
4240.976 7805.433 Dep Exp
0
[Link] 15610.87
are T accounts for the year 3
Dismentling Provision Accmulated Dep
46650.74 Op provision 15610.87 Op
4665.074 7805.433 Dep Exp
[Link] 23416.3
