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You are provided with an extract from the notes to the financial statements No.

ID: 2545966 • Letter: Y

Question

You are provided with an extract from the notes to the financial statements No. 14 (Property, plant, and equipment) for BOC Kenya Limited 2016 annual report.

2016

Land & Buildings

Plant & Machinery

Motor vehicles

Cylinders

Furniture & equipment

Capital

Total

Cost

At 1 January, 2016

113,169

515,260

207,760

729,356

51,168

32,549

1,649,262

Transfers

             -

              -

   31,482

     1,067

           -

(32,549)

                 -

Reallocation

         300

              -

               -

            -

           -

             -

           300

Additions

              -

   24,362

    13,329

   19,373

     4,837

14,830

      76,731

Assets removed

               -

               -

    (45,638)

              -

            -

             -

    (45,638)

Disposals

               -

               -

       (1400)

     (5,342)

              -

               -

       (6,742)

At 31 Dec, 2016

113,469

539,622

205,533

744,454

56,005

14,830

1,673,913

Depreciation

At 1 Jan. 2016

(56,094)

(407,697)

(108,726)

(333,853)

(43,797)

             -

(950,167

Reallocation

         (300)

    35,097

   (35,097)

                -

               -

              -

          (300)

Charge for the year

    (2,944)

    (21,096)

   (11,660)

   (24,810)

     (3,314)

               -

     (63,824)

Assets removed

                -

               -

     45,638

                 -

                 -

               -

        45,638

Disposals

                 -

                -

         1,400

       2,886

                 -

           4,286

At 31 Dec.2016

   (59,338)

(393,696)

(108,445)

(355,777)

    47,111

               -

   964,368

Carrying value:

At 31 Dec.2016

     54,131

145,925

     97,088

388,677

       8,894

14,830

    709,545

During the year, the company received compensation of kshs 4,078,138 (2015: 568,637) from third parties for lost cylinders and disposal of replaced trucks. The net book value of the disposed assets was kshs 2,455,204.

Included in property, plant and equipment are assets with a gross value of KShs 359,440,852 (2015: KShs 342,719,812) which are fully depreciated but still in use. The notional depreciation charge on these assets would have been KShs 51,780,882 (2015: KShs 45,489,450). There were no idle assets at 31 December, 2016 and 2015.

Required;

(a) What is meant by (i) depreciation, (ii) carrying value. (iii) Capital work in progress, (iv) transfers, (v) disposals?

(b) Illustrate how the carrying values of the assets are arrived at.

(c) What were the different components of plant, property, and equipment for the year 2016?

(d) What was the depreciation expenses for motor vehicles during the year?

(e) What was the accumulated depreciation for motor vehicles as at 31 December 2016. What does this figure represent?

2016

Land & Buildings

Plant & Machinery

Motor vehicles

Cylinders

Furniture & equipment

Capital

Total

Cost

At 1 January, 2016

113,169

515,260

207,760

729,356

51,168

32,549

1,649,262

Transfers

             -

              -

   31,482

     1,067

           -

(32,549)

                 -

Reallocation

         300

              -

               -

            -

           -

             -

           300

Additions

              -

   24,362

    13,329

   19,373

     4,837

14,830

      76,731

Assets removed

               -

               -

    (45,638)

              -

            -

             -

    (45,638)

Disposals

               -

               -

       (1400)

     (5,342)

              -

               -

       (6,742)

At 31 Dec, 2016

113,469

539,622

205,533

744,454

56,005

14,830

1,673,913

Depreciation

At 1 Jan. 2016

(56,094)

(407,697)

(108,726)

(333,853)

(43,797)

             -

(950,167

Reallocation

         (300)

    35,097

   (35,097)

                -

               -

              -

          (300)

Charge for the year

    (2,944)

    (21,096)

   (11,660)

   (24,810)

     (3,314)

               -

     (63,824)

Assets removed

                -

               -

     45,638

                 -

                 -

               -

        45,638

Disposals

                 -

                -

         1,400

       2,886

                 -

           4,286

At 31 Dec.2016

   (59,338)

(393,696)

(108,445)

(355,777)

    47,111

               -

   964,368

Carrying value:

At 31 Dec.2016

     54,131

145,925

     97,088

388,677

       8,894

14,830

    709,545

Explanation / Answer

(a).

(i) Depreciation is the decrease in the value of the asset due to usage / lapse of time.

(ii) Carrying value is the net value of the asset as at date after reducing the depreciation on the asset.

(iii) Capital work in progress , is the expenditure incured on capital assets before they are put inot use or operation. Example for capital work in process : Construction of a new factory building, which may take more than one - year to complete. The expenditure incurred on the building each period, is capitalised as capital work-in-progress until the building is put to use.

(iv) Transfers normally involves , the tarnsfer of the value of an asset from capital work-in-progress to a specific asset group.

(v) Disposal of an asset is the removal of the asset form the aset list , due to sale or obsolescence.

(c) Components of Property,Plant and Equipment are

i. Land and buildings

ii. Plant and Machinery

iii. Motor Vehilces

iv. Furniture and fixtures.

(d) Depreciation expense for motor vehilces during the year = 11,660.

(e) Accumulated Depreciation as at December 31, 2016 = $108,445.

This figure represents the depreciation charged over the period on the motor vehicles which are in use as at Dec.31, 2016.

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