Question

Musashi Ltd. commenced operations on January 1, 20X6. On that day, it bought: writing assignment - Equipment costing ¥3.6 million, with a useful life of 3 years. a Furniture and fittings costing ¥2.4 million, with a useful life of 4 years. - Motor vehicles costing $4.5 million, with a useful life of 10 years. No other PPE was purchased or disposed of during the year.

Requirement: What would Musashi report as PPE on its Balance Sheet?

Answer 1

Musashi Ltd. would report property, plant, and equipment (PPE) totaling ¥10.5 million on its balance sheet on January 1, 20X6, comprising equipment, furniture, and motor vehicles and not accounting for depreciation on the first day of operations.

Step-by-step explanation:

To calculate what Musashi Ltd. would report as property, plant, and equipment (PPE) on its balance sheet, we need to consider the cost of the assets and their useful lives. Since there is no mention of depreciation method or residual values, it is customary to assume straight-line depreciation and no residual value. However, since the company commenced operations on January 1, 20X6, and no disposals took place, the reported PPE will be the total cost of the assets purchased. No depreciation will be taken into account as it is the first day of operations.

The total cost of PPE on the balance sheet for Musashi Ltd. would be calculated as follows:

• Equipment: ¥3.6 million
• Furniture and fittings: ¥2.4 million
• Motor vehicles: ¥4.5 million

Therefore, the total PPE reported on the balance sheet would be ¥10.5 million (¥3.6 million + ¥2.4 million + ¥4.5 million).