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Practical caseIAS 16L2 · Intermediate

Logistics warehouse: components and replacement

3 documents8 tasks≈ 45 min
0 / 13 items completed
Standards
IAS 16 — Property, Plant and Equipment
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Logistica Sud (a fictitious company) acquired a logistics warehouse on 1 January 20X1 for 2,000,000, including land. It applies the cost model and its reporting date is 31 December. A surveyor allocated the price between the land and the significant parts of the building. In 20X6, several items of expenditure are incurred on the warehouse. The chief accountant asks you to review the depreciation schedule and the treatment of the 20X6 expenditure.

Your assignment

Select the useful data in the documents (some are not), identify the components, calculate depreciation, then deal with the 20X6 expenditure and record the entries for 20X6.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Intermediate level: help remains available, on demand.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 3 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 13) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

3 documents: open each one to read it.

Document 1Table

Surveyor's allocation report (1 January 20X1)

Total price: 2,000,000. Land: 500,000. Building: 1,500,000, allocated as follows: structure 1,030,000, useful life 40 years, residual value 50,000; roof 150,000, 15 years; heating, ventilation and air-conditioning 180,000, 12 years; docks and automatic doors 120,000, 10 years; statutory safety inspection performed just before the purchase 20,000, valid for 5 years. Nil residual value for the other parts. Straight-line method for all parts.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Land€500,000.00
Structure — cost€1,030,000.00
Structure — useful life40 years
Structure — residual value€50,000.00
Roof — cost€150,000.00
Roof — useful life15 years
Heating, ventilation and air-conditioning — cost€180,000.00
Heating, ventilation and air-conditioning — useful life12 years
Docks and doors — cost€120,000.00
Docks and doors — useful life10 years
Safety inspection — cost€20,000.00
Safety inspection — period of validity5 years
New system — cost€240,000.00
New system — useful life12 years
New inspection — cost€30,000.00
Routine maintenance for 20X6€12,000.00
Indicative market value€2,600,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort3

  • Surveyor's allocation report (1 January 20X1)

  • 20X6 expenditure (general ledger extract)

  • Estate agent's email (December 20X6)

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      8 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Which elements of the purchase price must be recognised and depreciated separately? Is the land depreciated?

      2. Task 2Calculation

        Calculate the annual depreciation charge for the warehouse for 20X1 to 20X5.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the annual depreciation charge for the warehouse for 20X1 to 20X5.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Annual charge for the structure

      3. Task 3Professional judgement

        How should each of the three 20X6 items of expenditure be treated?

      4. Task 4Calculation

        Calculate the carrying amount of the old system to be derecognised on 2 January 20X6.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the carrying amount of the old system to be derecognised on 2 January 20X6.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Carrying amount of the old system

      5. Task 5Calculation

        Calculate the depreciation charge for 20X6 after these transactions.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the depreciation charge for 20X6 after these transactions.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Journal entries

        What journal entries do you record in 20X6?

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        3. Line 3

        4. Line 4

        5. Line 5

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Journal entry · Journal entries

        Entry 2 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        3. Line 3

        4. Line 4

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 3 · Journal entry · Journal entries

        Entry 3 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 4 · Journal entry · Journal entries

        Entry 4 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      7. Task 7Effects on the financial statements

        What is the impact of these entries on the 20X6 financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        5. Notes

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      8. Task 8Conclusion

        Write the conclusion of your review.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 13).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 16 §12
      • IAS 16 §13
      • IAS 16 §14
      • IAS 16 §43
      • IAS 16 §44
      • IAS 16 §53
      • IAS 16 §58
      • IAS 16 §70