GROUP 3E

FAC1502-SEMESTER 1-2016

UNISA
PROPERTY PLANT & EQUIPMENT

[PPE]
Prepared by E-TUTOR: RAMASHAU ALUWANI
2016-04-28

UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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.

Eric Buttterworth once said Behind every brilliant performance

there were countless hours of practice and preparation
Kind regards
Mr. Ramashau Aluwani
UNISA E-Tutor: FAC 1502 (Group 3E)

I find that the harder I work, the more luck I seem to

have. Thomas Jefferson
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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

PROPERTY PLANT & EQUIPMENT-PPE

Non-current assets are acquired with the intention of carrying out,
supporting of facilitating operations.
Non current assets have an operating lifespan of more than one year and
can be used over and over again.
They are used but not consumed and not used up in the short term
Non current assets may be tangible, intangible or financial assets
Tangible non current assets are assets that you can see and touch such as
buildings, machinery, vehicles and furniture. They are shown in the
Statement of Financial Position under Property, Plant & Equipment
PPE becomes obsolete after severally years and must be written off
(depreciate) over their expected economic life.
When an asset can no longer operate economically, it is replaced.
The proceeds on the sale of an asset are normally used to partly finance
the new asset.

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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

COST PRICE OF PPE

The cost price of PPE consists of:
Purchase price, including all expenses incurred in
getting the asset to the premises
All the installation costs including, for example, the
wages of the business's own technical personnel
any other expenses incurred in getting the asset
operational

Cost price (historical cost price) - remain constant

throughout the life of the asset.
Financing costs on loans raised to acquire the
asset are not included in the cost price of the
asset.
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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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.

Diminishing balance (Reducing-balance) method

The annual depreciation is calculated on the carrying amount of asset

The carrying amount is obtained by deducting the accumulated depreciation on the asset from
the original cost of the asset
The depreciation rate is then applied to the carrying amount to calculate the depreciation.

Production unit method

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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

UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

EXAMPLE/FORMAT OF NOTE TO PPE

Carrying amount: Beginning of
year
Cost

Accumulated depreciation

Land &
Buildings

Vehicle Machinery Furniture Total

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

Carrying amount: End of year

Cost
Accumulated 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)

UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

STATEMENT OF FINANCIAL POSITION

(ONLY PPE)
Assets

20.5

20.4

Notes

221 300

216 000

xxxxxx

xxxxxxx

Non-Current Assets
Property, Plant & Equipment
Other Financial assets

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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

EXERCISE 11.1 STUDY GUIDE (PAGE 231)

Suppose Bilgredon bought a machine on 1 June 20.0
for R500 00 with a discount of R60 00, Transport costs
of R15 000 and Installation costs of R 5 000. The
depreciable cost price of the machine is R (500 000 60 000 + 15 000 + 5 000) = R 460 000. The estimated
lifespan is 5years. (Bilgredons Financial year ends on
31 May.)
Required
Journal entries
Statement of Financial Position
Note to PPE
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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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GROUP 3-ACTIVITY OF THE WEEK

You are required to attempt Question 3 November 2015 Exam Paper
You must submit on/before 02-MAY 2016
Remember, I also dont have solution to
previous question papers, therefore lets all
contribute and assist each other to get
possible solution to this question.
Make sure you read the required first and
apply principles thereof-PPE Study Unit 11
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UNISA E-TUTOR: A. RAMASHAU FAC1502S1-16-GROUP 3E

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REFERENCES
Please note for more information refer to the
following study materials:

2016-04-28

Tutorial letters
Study Guide -Study Unit 11 (PPE) from page 228
Previous Exam Papers
Prescribed Textbook

UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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.

STUDY UNIT 16 & 17

Done

10. ASSIGNMENT NO.1

Done

11. ASSIGNMENT NO.2

Done

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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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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

Great dancers are not great because of their technique, they

are great because of their passion. Martha Graham
You can never quit. Winners never quit, and quitters never win.
Ted Turner

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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UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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COUNTDOWN TO RIO EXAMS !!!

PRACTICE MAKES IT PERMAMENT!

THANK YOU
2016-04-28

UNISA E-TUTOR: A. RAMASHAU FAC1502-S1-16-GROUP 3E

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