Dolphin Limited owns only two items of property, plant and equipment:
• a medical waste disposal plant (carrying amount at 31December 20X3: C 5,600,000); and
• a ship that was purchased on 2 January 20X4 (purchase price: C 20,000,000).
There were no sales and no other purchases of property, plant and equipment during 20X4. The purchase price paid for the ship has been analysed as follows into the estimated cost per significant component:
Description of component
10 000 000
Estimated useful life of 8 years with a residualvalue of C 2 000 000
9 000 000
Estimated useful life of 1000 000 nauticalmiles with a nil residual value
Major inspection (whichhad been performed on5 January 20X2)
Major inspections are a pre-requisite to thecontinued use of the ship.The next major inspection was due andperformed on 30 June 20X4 at a cost ofC 6 000 000 -paid in cash.The following major inspection is due on31December 20X6 at an expected cost ofC 7 500 000.
Total price paid(2/Jan/20X4)
20 000 000
• Depreciation on the medical waste disposal plant was C 2,800,000 in 20X4 (being the total depreciation on all of its components). Depreciation is provided on the medical waste disposal plant using the straight-line method.
• Depreciation on the ship is to be provided on the sum of the units method w'here possible. Where this method is inappropriate, the straight-line method is to be used instead. The ship travelled 100,000 nautical miles during 20X4.
Journalesethe movement in the carrying amount of property, plant and equipment for the year ended 31December 20X4.
Ignore tax effects.
Roads International Limited constructed its own specially designed ‘tarring vehicle’. Details of related costs incurred are as follows:
Description of cost:
Cost of raw materials purchased
Cost of raw materials used in construction of tarring
vehicle during June 20X2
Tests to ensure vehicle safe before brought into use
30 September 20X2
Depreciation on machinery to 31December 20X2
Factory labour costs to 31December 20X2
• The company-owned machinery was used for a quarter of the year in the construction of the tarring vehicle.
• 80% of the total labour costs for the year were incurred on building roads and 20% thereof were incurred in construction of the tarring vehicle. Of the total labour cost incurred on the construction of the tarring vehicle, an estimated 5% was as a direct result of a country-wide labour union strike during which labourers were paid but yet did not turn up for work.
• The vehicle was first brought into use on a contract that started on 1 November 20X2, although it was available for use from 1 October 20X2.
• The company uses the straight-line method to depreciate its vehicles. This vehicle is expected to be sold for C 50 000 at the end of its expected useful life of 5 years. A similar vehicle realised C 7 000 when sold at the end of 20X2.
a) Journaleseall related transactions for the year ended 31 December 20X2.
b) Disclose the vehicle in the ‘property, plant and equipment’ note and the separately disclosable item: ‘depreciation’ in the notes to the financial statements of Roads International Ltd for the year ended 31December 20X2.
Comparatives are not required.
Ignore the effects of taxation.