Reference no: EM132918909

During your audit of SUV Ltd PPE you note the following material matters for consideration by the audit partner.

a) The company's policy is to take a half year depreciation for all asset additions and disposals during the year.

b) During the year SUV entered into a 10-year lease contract for a die casting machine. At the end of the contract there is a bargain purchase option and the lease is non- cancellable. SUV have expensed the lease payments for the machine and all incidental costs including installation, testing, and training of employees.

c) SUV constructed a new building during the year using their employees staff labour and purchased materials. The cost of materials and overhead only have been capitalised. The labour was expensed.

d) They paid for paving and fencing for a carpark and charged it to the land account.

e) The local council donated land and buildings to SUV in exchange for obsolete

Equipment. As no cash outlay was involved no entry was made in the accounts.

f) Some fixtures and fittings that are no longer used but still retained on the premises were depreciated as they have not yet reached their estimated life expectancy.

Required:

Problem 1: Discuss the treatment of each of the above items and note any changes that you deem may be necessary. Ignore tax implications.