College of Business and Economics
Department of Commercial Accounting
Financial Accounting 1B (FAC11B1)
UNIT 6: PROPERTY, PLANT AND EQUIPMENT
TUTORIAL
QUESTION 1 13 MARKS
Answer the following question with regard to Property, Plant and Equipment:
1. A Vehicle was purchased to the value of R 720 000(incl VAT) on 1 August 2023. A
trade discount of R 5 000 (excl VAT) was received. What will the initial recognition
value of the equipment be on 1 August 2023?
2. Depreciation on the vehicle needs to be calculated at 10% pa on the straight-line
method. The year end for the entity is 31 December 2023. Calculate the
depreciation for 2023 and record the journal entry.
3. Disclose the above vehicle in the notes for 2023. The following additional
information is provided:
Description Amount
Vehicles Cost 1 January 2023 R 400 000
Vehicles Accumulated Depreciation 1 R 30 000
January 2023 (Depreciation is 10%
on the straight-line method)
QUESTION 2 12 MARKS
Answer the following question with regard to Property, Plant and Equipment:
1. What is the definition of Property plant and equipment?
2. Name three costs that are included in the cost price of PPE?
3. Equipment was purchased for cash to the value of R 500 000(incl VAT) on 1 June
2023. All parties to the transaction are registered VAT vendors. The following
additional costs were incurred. Import duties R 60 000 and transport to bring the
equipment to the current location for use R 70 000(ex VAT). What will the initial
recognition value of the equipment be on 1 June 2023?
4. Provide the journal entry to record the above transaction.
5. The equipment discussed in points 3 and 4 above will be depreciated at 10% p.a
on diminishing balance method. The year-end for the entity is 31 December 2023.
Calculate and provide the journal entries for the depreciation.
QUESTION THREE 10 MARKS
1. Apply the correct definition to the following scenario. A vehicle was purchased on
credit worth R 500 000 on 1 January 2023 (Start of the financial year). The vehicle
will be used for delivery purposes.
2. Machinery was purchased on 1 December 2023 at R600 000(incl VAT). The
machine was ready and brought into use on 31 December 2023. However, the
payment was only made on 25 January 2024. The year end for the entity is 31
December 2023. According to IFRS when will the machinery be recorded in the
books?
3. Disclose the above machine in the notes for 2023. The following additional
information is provided. Depreciation is calculated at 10% on the diminishing
balance method. This following information is also provided:
Description Amount
Vehicles Cost 1 January 2023 R 509 680
Vehicles Accumulated Depreciation 1 R 75 000
January 2023 (Depreciation is 10%
on the straight-line method)
