Case Stimulus
Okuku State University is one of the parastatals of Okuku State, but it is not a Government Business Enterprise (GBE). The following information relates to the accounts of the University for the year ended December 31, 2018:
Statement of financial position as at December 31, 2018
Cost Accum. Dep. Carrying
amount
Non-current assets N‟million N‟million N‟million
Land and buildings 15,000 250 14,750
Equipment 1,000 100 900
Furniture 800 80 720
Plant and machinery 550 50 500
Motor vehicles 450 45 405
17,800 525 17,275
Current assets
Inventories 11,000
Receivables 15,000
Bank 3,000
29,000
Total assets 46,275
Non-current liabilities 30,000
Current liabilities 8,000
Total liabilities 38,000
Net assets 8,275
Net assets/equity
Reserves 8,275
The following transactions, which took place during the year ended December 31, 2018 were not recorded in the books.
(i) The University acquired office equipment worth ₦150,000,000 from Joko Nigeria Limited. The installation and transportation of the equipment amounted to ₦3,000,000. Half of the cost of the equipment was paid during the year, while the balance was paid later in January 2019. The University took over the building of a defunct State College of Education. The fair value of the building taken over was estimated at ₦500,000,000, at the end of the year.
(ii) The University Teaching Hospital received motor vehicles and laboratory equipment from a UK based research institute as donation during the year. The intervention was to curtail the spread of lassa fever in the country. The cost of the motor vehicles and laboratory equipment donated amounted to ₦20,000,000 and ₦50,000,000, respectively.
(iii) The University acquired a motor vehicle for ₦150,000,000 on January 1,2018.
(iv) One of the buildings owned by the University was gutted by fire during the year ended December 31, 2018. The carrying amount of the building as at the date of the fire incidence was put at ₦160,000,000. The fair value of the building after the fire incidence at the end of the year was estimated by a valuer to be ₦130,000,000.
(v) The University acquired motor vehicle on January 1, 2017 at ₦8,000,000 with an estimated useful life of 5 years. The University decided to dispose of the motor vehicle for ₦4,000,000 at the end of the second year.
(vi) The University acquired computers on January 1, 2017 at the cost of ₦1,000,000. The computers have an estimated useful life of 5 years. Due to fire outbreak in the University on December 31, 2018, the computers were badly damaged and of no use to the University. It was resolved that they should be discarded and written off. The University uses straight-line method in depreciating its property, plant and equipment (PPE).
(vii) The University acquired a land in 2018 at the cost of ₦50,000,000 to construct a plaza for rent. Cost of construction was put at ₦250,000,000 as at the end of the year 2018. The plaza was estimated to have a useful life of 25 years. It is the policy of the University to depreciate investment properties using the straight-line method.
(viii) The University adopted full year depreciation policy using the following rates:
%
Motor vehicle 20
Building 4
Furniture 10
Equipment(including Laboratory and computers) 20
Plant and machinery 15