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FAC1502-SEMESTER 1-2016
UNISA
PROPERTY PLANT & EQUIPMENT
[PPE]
Prepared by E-TUTOR: RAMASHAU ALUWANI
2016-04-28
STARTING LINE-UP
Introduction
PPE and Cost Price
Depreciation
Examples
Tips on PPE
Must Do Exercises
Self Assessment
Weekly Activity
Inspiration quotes
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INTRODUCTION
Dear Honourable Members
Judging by the previous examination papers this is one of the topic that YOU
MUST KNOW. Every semester the examiner used different strategy to test
your knowledge refer to selected Previous question papers on slide 13 for
more information.
There is no need to memorize but to understand the golden rules around PPE.
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DEPRECIATION
Non-current assets are acquired with the purpose of generating
income
Depreciation is the systematic allocation of the depreciable amount
of an asset over its useful life.
Once the depreciable amount has been established the method of
allocating the depreciable amount must be decided on.
Depreciation is an expense which allows for the matching of the
original cost of non-current asset against income generated by the
asset.
If the asset was used for only a part of the accounting period, the
depreciation is calculated on the number of months for which the
asset was used.
The annual amount written off (Depreciation) is treated as an
expense in the profit and loss account
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METHODS OF CALCULATING
DEPRECIATION
There are various methods of determining the amount of annual depreciation to be
written off.
Straight-line (fixed Instalment) method
Cost price is written of over the expected useful life (in years) of the asset.
If the asset is expected to have some value after its economic life, this value is known as
residual value. To calculate the depreciation, the Residual value must first be deducted from
the cost of the asset before the depreciation rate is applied.
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In this case the units produced by the machine are written off annually as a percentage of the
units the machine is expected to produce over its total life span.
Formula for calculating depreciation=Units produced during the year divide by Expected
number of units to be produced over lifespan x Cost Price
Accumulated depreciation
Land &
Buildings
150 000
29 000
23 000
14 000
216 000
150 000
60 000
33 000
22 000
265 000
(31 000)
(10 000)
(8 000)
(49 000)
Additions (Purchases)
30 000
Disposals (Sold)
(5 200)
Depreciation
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30 000
(5 200)
(10 200)
(7 100)
(2 200)
(19 500)
150 000
13 600
45 900
11 800
221 300
150 000
42 000
63 000
22 000
277 000
(28 400)
(17 100)
(10 200)
(55 700)
20.5
20.4
Notes
221 300
216 000
xxxxxx
xxxxxxx
Non-Current Assets
Property, Plant & Equipment
Other Financial assets
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DISPOSAL OF PPE
Exercise 11.3 : Study Guide (Page 243)
Scrapping an asset (at the end of the financial year) which
has not been written off (depreciated) entirely.
Suppose that Bilgredon bought a machine costing
R460 000 on 30 November 20.0. They decided to scrap
the machine at the year ended 31 May 20.5 when the
accumulated depreciation amounted to R402 500.
Required:
(a) Journal entries and Ledger accounts
(b) Note to PPE
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TIPS ON PPE
Profits or losses on disposal of assets must be disclosed
separately in the Statement of Comprehensive Income.
You may be required to prepare the following General
Ledger Accounts such as: Equipment, Vehicle, Accumulated
Depreciation, Depreciation and Assets Realisation Account.
Refer to Question 1 of Tutorial letter 102
Sometimes you may be given ledger accounts prepared and
required to prepare the Property Plant & Equipment Note to
the Financial Statement.
Always read the question and apply the correct method
when calculating depreciation.
Previous Exam Question papers are very important
Note to PPE, Easy marks!!!
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REVISION EXERCISES
Previous Question Papers (Available under Official Study Material Link)
Question 4 (May-June 2013)
Question 3 (Oct-Nov 2013)
Question 3 (May-June 2014)
Question 4 (Oct-Nov 2014)
Question 2 (May-June 2015)
Question 3 (Oct-Nov 2015)
Tutorial Letters
Tutorial Letter 102 (Question 1)
Study Guide
Revision Exercise 1 (Page 248)
Revision Exercise 2 (Page 250-251)
Revision Exercise 3 (Page 252-253)
Revision Exercise 4 (Page 255)
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14
REFERENCES
Please note for more information refer to the
following study materials:
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Tutorial letters
Study Guide -Study Unit 11 (PPE) from page 228
Previous Exam Papers
Prescribed Textbook
15
TICKBOX/SELF ASSESSMENT
STOP, ITS ASSESSMENT TIME!
NO. TOPIC
STATUS
1.
STUDY UNIT 1 -5
Done
2.
STUDY UNIT 6
Done
3.
STUDY UNIT 7
Done
4.
STUDY UNIT 8
Done
5.
STUDY UNIT 9
Done
6.
STUDY UNIT 11
Done
7.
STUDY UNIT 13
Done
8.
STUDY UNIT 15
NOT DONE
9.
Done
Done
Done
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16
INSPIRATIONAL QUOTES
If you talk to a man in a language he understands, that goes to
his head. If you talk to him in his language, that goes to his
heart. Nelson Mandela
It does not matter how you start the race Comrade marathon
what matters is how you finish the race. Unknown
Do something wonderful, people may imitate it. Albert
Schweitzer
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THANK YOU
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