ExpertHard2 marksShort Answer
ACCA · Question 27 · Preparing basic financial statements
A company's Property, Plant and Equipment (PPE) had a carrying amount of $500,000 at the start of the year and $620,000 at the end of the year. During the year, depreciation of $80,000 was charged, and a machine with a carrying amount of $40,000 was sold for $50,000. What was the cash paid to acquire new PPE during the year? (Enter numbers only)
A company's Property, Plant and Equipment (PPE) had a carrying amount of $500,000 at the start of the year and $620,000 at the end of the year. During the year, depreciation of $80,000 was charged, and a machine with a carrying amount of $40,000 was sold for $50,000. What was the cash paid to acquire new PPE during the year? (Enter numbers only)
How to approach this question
Reconstruct the PPE carrying amount T-account. Opening balance + Additions - Disposals (carrying amount) - Depreciation = Closing balance.
Full Answer
Let X be the additions. Opening PPE ($500,000) + X - Depreciation ($80,000) - Carrying amount of disposal ($40,000) = Closing PPE ($620,000). $500,000 + X - $120,000 = $620,000. $380,000 + X = $620,000. X = $240,000.
Common mistakes
Deducting the sale proceeds ($50,000) instead of the carrying amount ($40,000) from the PPE account.
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