CACB002: Calculating the Cost (i.e. at Initial Recognition) of an Item of Property, Plant and Equipment - Management Assignment Help

Assignment Task:

Task:

SCOPE OF THE ASSIGNMENT
Due to the poor performance of students in TEST 1 on this particular topic, the CACB002 assignment will be in the form of a revision question on IAS 16 Property, Plant and Equipment.
The assignment aims to assess students’ understanding of the following concepts:
− Calculating the cost (i.e. at initial recognition) of an item of property, plant and equipment.
− Know how to account for and disclose the purchase and disposal of property, plant and equipment.
− Recognising whether or not subsequent expenditure needs to be capitalised to the cost of an existing PP&E item.
− How to calculate depreciation using the various depreciation methods.
− Presenting information about the property, plant and equipment in the annual financial statements in terms of generally accepted accounting practices.
PURPOSE OF THE ASSIGNMENT
The assignment provides a deliberate revision opportunity to students who have performed poorly
on this topic in TEST 1.
Problem solving skills will be tested as the question requires sufficient thinking and problem solving skills to be applied to complete the task.
The assignment will also test the students’ ability to cope with technology as students will need to convert pictures taken of handwritten work into a pdf format using a ScannerApp in order to submit their assignments on black board before the deadline.
MARKS
Students will be assigned a mark out of a 100 and it will contribute 10% towards the semester mark. INSTRUCTIONS FOR COMPLETING AND SUBMITTING THE ASSIGNMENT The assignment is an individual assignment and each student must submit his / her OWN ATTEMPT by no later than 31 December 2020. The next two weeks have been set aside for the assignment to give students enough time to complete the assignment. No new work will be uploaded during this time. The assignment will also serve as excellent revision in your preparation for TEST 2! Please adhere strictly to the following instructions:
− The assignment should be handwritten (NO electronic format will be accepted).
− Write neatly and legibly.
− Only black pens allowed (other colour inks do not scan well).
− Use lined paper, so that answers are presented neatly.
− Write only on one side of the paper as this will be easier to scan and will prevent ink from going through to the other side of the paper and blurring the scanning of the reverse side of the page.
− Each handwritten page should be numbered and labelled correctly at the top.
− Your handwritten pages should now be converted into PDF by using one of the ScannerApps.
− Your PDF document should be submitted via the link on black board by 16h00 on 31 December 2020. No email / WhatsApp submissions will be accepted!
− Assignments submitted after the deadline will NOT be marked!

ASSIGNMENT
Stuffed With Love Ltd (hereafter SWL) is a South African company that manufactures and sells stuffed toys. The company has a financial period ending 30 June.
The company had the following assets in their books as at 1 July 2019 which are carried using the cost model as prescribed by IAS16:

Class Cost price Accumulated depreciation Notes
Land and buildings 10 000 000 738 000 1 & 2
Machinery 7 800 000 3 510 000 3
Vehicles 6 240 000 2 750 000 4
Furniture and fittings 5 640 000 1 410 000 5
All of the above assets were bought on the same date (i.e. the day the company was incorporated) and since then to the beginning of the current financial period there have been no additions or disposals of any assets.

NOTES:
1. Land consists of 25% of the cost price of land and buildings. Land is not depreciated as it is considered to have an unlimited useful life.

2. The building was acquired to house the company’s administrative headquarters as well as the factory where the teddy bears are manufactured. On 1 March 2020, the company spent R1 500 000 on painting and landscaping in order to give the building a facelift. The facelift was much needed as the building was starting to look run-down and unkempt in comparison to some of the newer buildings being erected in the area.

On the date of acquisition, SWL estimated that the building would have a useful life of 25 years, after which it is expected to be worth R120 000. Buildings are depreciated over its estimated useful lives using the straight-line depreciation method.

3. On 30 September 2019 the company purchased a new machine. Details regarding the cost of the machine was as follows:

R
Purchase price 1 250 000
Transport costs 68 000
Installation costs 50 000
Direct costs of testing the machine to ensure that it is operating in the manner intended by management.

80 000
Proceeds from the sale of the goods produced in testing. 60 000
Training costs incurred in training production staff on the new machine. 12 500
According to the company’s accounting policy, machinery are depreciated using the units of production method. The following information is available with regards to the estimates made by management:

Old New
Residual value 10% of cost price 10% of cost price Number of units the machine(s) are expected to produce over its useful life

1 755 000 units 396 000 units

Actual number of units produced:
− Up to 30 June 2019
− Between 1 July 2019 – 30 June 2020

877 500
390 000

0
79 200

4. SWL’s fleet consists of 8 delivery vans, each of which cost R780 000 and is expected to have a useful life of 4 years. At the end of the 4 years, SWL expects that it will be able to sell the delivery vans to a second-hand car dealer for 30% of their original cost price. However, to sell it at that price SWL will have to incur costs of R4 000 per vehicle to have it properly serviced upon the sale thereof. Motor vehicles are depreciated over their estimated useful lives of 4 years, with the expectation that benefits will be generated evenly over the 4-year period. One of SWL’s delivery vans, with an original cost price of R780 000, was sold on 30 November 2019 for R445 000.
5. SWL expects its furniture and fittings to have a useful life of 10 years. It is company policy to  depreciate furniture and fittings over their estimated useful lives using the diminishing balance method at a rate of 15% per year.

YOU ARE REQUIRED TO:
Disclose the property, plant and equipment in the notes to the financial statements of Stuffed With Love Ltd for the financial period ending 30 June 2020.
− The accounting policy note and comparative figures are not required.
− Show all calculations as marks will be awarded.

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