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CHAPTER ONE

INTRODUCTION

1.1. Back ground of the organization

Limmu coffee plantation is the main branches of coffee plantation


Development enterprise that have been engaged in activities of producing
coffee as main, and maize, fruits, and Honey as side produces for
domestic and export market. Coffee plantation development enterprise
previously named as coffee plantation development corporation which
was established in 1980 under the ministry of coffee and Tea in order to
manage and administer the national small private farms and to develop
new plantation where ever suitable in the country. Currently coffee
plantation development enterprise is under the supervision of the
privatization and public enterprise supervisory agency. The agency has
appointed the board of directors by which the enterprise led.

Limmu coffee plantation is one of the three coffee plantations


administers under CPDE, which is located in the south western part of
Ethiopia, Oromia region Jimma zone. It has five coffee farm and two
maize producing farms. The five coffee plantations produces, along with
coffee other high value side line products such as fruits, Honey and other
products. It has been engaged in broad vitally important activities that
play a prominent role in the development of domestic economy, since
LCP is a profit motive, mainly generate its revenue from sales of coffee.
The annual sales ranges from Br. 86,250,000 to 132,250,000 Million in
the past of 3 to 4 Years. The plantation currently owns about 216, 994,
403 Ethiopian Birr capital. LCP has 11, 181.7 hectares of land of these
7, 908 hectares covered with coffee, 17541 hectares covered with other
side line crops and employee’s camp and 1519.6 hectares are
uncultivated area.

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1.2 Background of the study

A fixed asset is a bundle of future services. The cost of acquiring fixed


asset is a measure of the amount invested in future services that will be
provided by the asset. This long term tangible assets have a permanent
nature used in the operations of the business and not held for sale in the
ordinary course of the Business such as equipment, tool, machinery,
Building, and land. At the time of acquisition, cost is an objective
measure of the exchange value of an asset.

The cost acquiring a plant asset includes all expenditures necessary to


get in place and ready for use. This means the cost of the asset equal to
the cash outlay necessary in acquiring the plant asset plus any
expenditure for Tax, transportation, insurance on the asset, installation
cost, and any other cost necessary to make the asset ready for use. Thus,
cost on the acquisition usually is the best estimate of the assets fair
value. The method of valuation is application of historical cost or
exchange principle i.e. When a cost is not incurred at acquisition of fixed
asset such as when an enterprise issues shares of its own stock to
acquire a fixed asset. Both the asset and the stock should be recorded at
fair value of what is received or given.

The entire costs is recorded as an asset at the time of purchase The cost
of the asset allocated to Asset useful life.

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1.3. Statement of the problem

Fixed asset often constitutes a large category of Assets so that the


emphasis for maintaining accurate and complete accounting records of
fixed asset emanates from ownership determination, cost allocation and
presentation.
Financial report that reflects fixed asset value and depreciation allocation
to fixed asset, which is presented on income statement and balance
sheet. In accounting different methods used to allocate the costs of long
term asset to estimated life. Although the allocation of depreciation to
fixed asset do not represent a cash expense of the organization.
So that the study would enabled to answer the following research
questions
 How fixed asset are valued in Limmu coffee farm?
 Does the valuation of deprecation method is used by the farm?
 What methods of deprecation does the farm use?
 How fixed assets and depreciation expense are reported in the
financial statement of the farm?

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1.4 Objectives of the study
The general objective of this study would be to assess fixed asset
valuation method and allocation of deprecation expense over the life of
fixed asset of the farm.
1.4.2. Specific Objective
 To identify the methods of depreciation applied by the organization.
 To assess the valuation of fixed assets.
 To assess how fixed assets are valued and recorded on the
financial statement of farm.
 To evaluate the valuation of fixed assets and methods of
deprecation in accordance with GAAP.
 To assess how fixed assets would reported.
1.5. Significance of the Study
The study would examined fixed asset valuation and way of reporting
and it would have the following significance:-
 It would guide and reflect how the farm valued fixed assets.
 The researcher have be enable to relate the theoretical knowledge
regarding fixed asset valuation, Deprecation allocation method and
way of reporting that he has with the real existing practice.
 The study have be used as a model for other comming new
generation in the study area.
 It would help to arrange the organization financial system in
accordance with GAAP rules and procedures.
 Most of all, from the result of the study the concerned parties
would able to solve the existing problem and strengthen their good
working habit.

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1.6 Scope of the study
The study was conducted on LCPE. Throughout the analysis the focus of
the study was only towards fixed asset valuation method and way of
reporting. since the scope of fixed asset is very wide, and covering all
aspects of the problem cannot be possible to the researcher as per a
given time and other constraints.
To keep rule of feasible and realistic of the study, concerning on specific
parts from the issue is advisable. Thus, area that is covered on this
study was conducted on main office of the organization. And by using
five accounting years documents.
1.7 Limitation of the study
This research has encountered the following problem
1. The study was conducted in a short period of time. Thus, forced
the researcher to collect data not in very detail.
2. Dalliance to responses for interview and questioners by
respondents, forced the researcher to take information more from
secondary supporting document.
1.8 Organization of the paper
This study organized with five chapters. The first chapter which is an
introduction section of the study included background of the
organization, background of the study, statement of the problem,
objective of the study, significance of the study, scope of the study and
limitation of the study. The second chapter dealt with the related
literatures review. The third chapter dealt with research design and
methodology, the forth chapter dealt with data analysis and presentation
of the finding. Finally, chapter five dealt about conclusion and give
recommendations.

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CHAPTER TWO

LITERATURE REVIEW

Fixed assets:- are tangible resources that are used in the operations of
the business and are not intended for sale to customers. They are also
called property, plant, and equipment; or plant Assets. These assets are
generally long term and are expected to provide services to the company
for a number of years. Except for land, plant assets decline in service
potential over their useful lives (Weygant etal, 1999).

Fixed asset are long-term or relatively permanent tangible assets that are
used in the normal business operations. They are owned by the business
and are not held for sale in normal operations. These assets may also be
described in more specific terms, such as equipment, furniture, tools,
machinery, building, and land. There is no standard rule as to the
minimum length of life necessary for an asset to be classified as a plant
asset such assets must be capable of providing repeated use or benefit,
and are normally expected to last more than a year. How ever, an asset
need not actually be used on an ongoing basis or even often. For example
items of stand by equipment held for use in the event of a break down of
regular equipment or for use only during peak periods of activity are
included in plant asset. Also long term assets acquired for resale in the
normal course of business are not classified as plant assets, regard less
of their permanent nature or the length of time they are held (Fess, etal
1996).

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Classification of fixed assets

Assets used in operations may be divided in to tangible and intangible


categories as follows:-

 Tangible assets: - Tangibility is the characteristic of bodly


substance as exemplified by a tract of timber, abrades, or machine.
 In angible assets:- In Tangibility denotes alack physical substance.
Examples of intangible assets ( as this term is used in financial
accounting) includes patents, copyrights, trade marks, Franchises,
organization costs, and good will (Mosich, 1998).
Cost of plant asset
The total cost of plant asset is the cash outlay, or equivalent, made to
acquire the asset and place in operating condition. Also until a plant
asset is ready to perform the services for which it was acquired, it is
not include some plant assets, such as a truck or a computer, are
complete and reed to function at acquisition. The cost of such assets
may be measured by the total of the invoice price (including sales tax)
and transportation costs. Other assets, for example an automobile
assembly line or the machinery for a paper mill, must be assembled,
installed, and tested. All expenditures connected with the assembling,
installing, and testing logically are viewed as part of cost of the asset
(mosich, 1998).
Cost is the basis for recording the acquisition of a plant asset. The cost of
a plant asset includes all normal and reasonable expenditures necessary
to get the asset in place and ready to use. In short, the cost of a plant
asset includes all normal, necessary, and reasonable costs incurred in
getting the asset in place and ready to produce. A cost must be normal
and reasonable as well as necessary if it is to be properly included in the
cost of a plant assets (Larson, 1990).

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Depreciation of Fixed assets

Since plant assets are purchased for use, you may think of a plant asset
as a quantity of usefulness that will contribute to the operations of the
business throughout the service life of the asset. However, the life of any
plant asset (other than land) is limited, this quantity of usefulness
expires as the asset is used. This expiration of plant assets quantity of
usefulness is generally described as depreciation (Larson, 1990).

Depreciation is the portion of the cost of fixed assets that is deducted


from revenue for assets services used in the operations of a business
enterprise. The concept of depreciable is linked closely to the
measurement of net income, because part of the service potential of
despicable fixed assets is exhausted in the revenue generating process of
each accounting period, the cost of these services must be deducted from
revenue in the measurement of net income (Kieso, 1986).

Factors involved in Depreciation computation

I. Asset cost:- the cost of an asset includes all the acquisition


costs necessary to obtain the benefit to be derived from the
asset
II. Service life:- the service life of an asset is the measure of the
number of units of service expected from the asset before it’s
disposal service life may be measured in units of time such as
years and months or units of capacity such as hours of
operation of a machine and miles driven for atruck. The factors
that limit the service life of the asset can be physical or
functional causes. Physical causes include wear and tear due to
operational use, deterioration and delay as well as damage and
destruction. Functional courses limit the service life of the asset
through obsolescence and inadequacy, even though the

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physical life is not exhausted. obsolescence is a common
occurrence when the asset is rendered obsolete by the
introduction of new technology. In adequacy refers to the
situation in which an asset is no longer suitable for the size of
the companies operation.
III. Residual Value:- The residual or salvage value is the net
amount that can disposition of an asset at the end of its service
life. It is the difference between the expected value of the asset
at the end of its service life and the cost of disposal such as
selling of the asset (Mosich, 1998).

Method of cost allocation:- Accounting principle require that the method


of cost allocation be systematic and rational. systematic means that the
calculation should follow a formula and not be determined in an
arbitrary manner. Rational means the amount of depreciation should be
related to the benefits the assets produce in each period. Some of the
cost allocation methods are the activity method, straight line methods,
declining balance methods, sum of years digit method, group deprecation
and composite depreciation method. The activity methods should be
used when it is assumed that the service life of the asset is affected
primary by the amount of the asset used and not by the passage of time.
When this method is used, deprecation expense can be calculated after
finding the depreciation per unit (Kiesso, 1986).

Depreciation per Unit= cost -Residual value


Total life of activity level
Thus, depreciation expense can be obtained by multiplying this
depreciation per unit with the total production level product in that year.
The time based method, which includes the straight line, sum of yrear’s
digit as well as declining balance methods, should be used when it is
assumed that the service life of the asset is affected primary by the
passage of time and not by the usage- of the asset. The straight line

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method produces a constant depreciation each year. It can be calculated
As follows (Kiesso, 1986).

Depreciation= cost –residual value


Use full life
The sum of year’s digit method produces declining depreciation period by
applying a declining fraction each year to the depreciation base. The
denominator of the fraction is the sum of the year’s digit. It can be
computed as n (n+l)/2 where “n” is the number of useful life in year. The
depreciation expense under this method is obtained by multiplying the
depreciable cost with the corresponding fraction in the year (Mosich,
1998).The declining balance method produces a declining depreciation
amount each period by applying a constant rate to be book value of the
asset at the beginning of the period.
Under this method deprecation expense is calculated by multiplying the
book value of the asset at the beginning of each year with the constant
rate developed. Group depreciation is used when a group of homogenous
asset is owned by the company, when time in the group is retire, no gain
or loss is recognized on that time because the entire asset in not retired,
a total net gain or lose on the group as a whole is recognized when the
final UNIT in the group, is retied. The group depreciation rate is based on
the average life of the asset in the group and depreciation is accumulated
in a single contra asset account using the straight line method (mosich,
1998).
annual deprecation = cost –residual value
Useful life

Totaling the annual depreciation of each asset and comparing it with the
total cost of the asset results the group depreciation rate.

That is,

Group depreciation= Total annual depreciation


Total cost of the asset

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Thus deprecation of each period is calculated by multiplying the gross
depreciation rate with the balanced is the asset account.

Composite depreciation may be applied to heterogenous assets that have


some what similar purpose. As with group deprecation the assets are
combined in a single asset account and depreciated accordingly. To
arrive at the composite depreciation rate, first calculate the annual
depreciation of each asset using straight line methods. Then by totaling
the cost as well as the annual deprecation separately, the ratio can be
calculated as follows (fess and warren, 1989)

Composite depreciation rate= total annual depreciation


Total cost of the asset

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CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

The research is conducted on the fixed asset valuation and way of


reporting on financial report of Limmu coffee plantation

3.1 source of data:-

This study would focus on the fixed asset valuation and way of reporting
in Limmu coffe plantation development enterprise. In order to attain the
proposed objectives, the researcher would use both primary and
secondary data. The source of primary data would obtained from
respondents through questioners containg both closed ended and open
ended. Where as Secondary data would obtained from financial
statements and various document of the farm.

3.2. Method of data collection

To collect the necessary data the researcher has been used both primary
and secondary data. To collect primary data questionnaires were used,
while secondary data was collected from different Accounting records and
documents.

3.3. Sample size and sampling techniques

The sampling size of the study was limited to 15% of total population of
180 those engaged in Limmu coffee farm like different personnel, logistic
and supply, and finance staff.

The methods of sampling have been used in this study is proportional


stratified random sampling which is dividing the whole households in to
homogeneous subgroups then taking simple random sampling in order
to give equal chance to all sub groups or strata

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The strata and stratum are presented as following.

Business sector/personnel Total population sampling size

Finance staff 25 15

Logistic and supply 10 3

Manager of farm 1 1

Other personnel 144 8


Total 180 27

There are several major reason why the researcher prefer stratified
sampling over other techniques. First, it assure that the researcher
would able to represent not only the over all households but also key
subgroups of households second, stratified random sampling generally
have more stastical precisions than simple random sampling.

3.4. Method of data processing analysis and Interpretation


In the study process different types of raw data have been collected. The
raw data collected would processed, analyzed, and interpreted.
Descriptive analysis method would employed for processing and analysis
proposes. After the data was effectively processed and analyzed, the
analyzed facts would interpreted.

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CHAPTER FOUR
Presentation and analysis of data
The purpose of this study is to assess fixed asset management on the
performance of the business with the aim of indentifying and analyzing
factors that influence a proper management of fixed asset valuation and
depreciation allocation with its consequences taking Limmu coffee farm
as a sample study units.

The necessary data for attaining the stated objective were collected from
both primary and secondary data source. The sampled employees of the
farm which are 27 in number were asked about fixed Assets are
discussed below.

Table 1 Background of the Respondent


Age number Percentage %

23-35 15 55.56

36-48 11 40.74

>48 1 3.7

Education Degree 6 22.22


Background
Diploma 13 48.15

Certificate 3 11.11

12 5 18.52
complete

Tables 1 show that

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55.56% of the respondents lies the age between 23-35, 40.74% of
respondents lies between 36-48 age and 3.7% above 48 age. The
education background of respondents show 22.22% graduate of BA
Degree, 48.15% graduate of diploma, 11.11% of respondents have
certificate and 18.52% grade twelve completed. Based on the above
table the researcher concluded that there is a good education
background of the employee of the organization. Also age of the employee
show they are between the productive stage.
Table 2 Respondents experience in the organization based on their
response
Year of experience November of Percentage
respondents

2-10 13 48.15%

11-16 7 26%

17-25 5 18.52%

>25 2 7.33%

Total 27 100%

As indicated in the above table 49.15% of the respondents have an


experience between 2-10 years, 26% have an experience between 11-16,
18.52% have an experience between 17-25and 7.33% have an experience
above 25 years. So the researcher concluded that employee of the
organization are experienced one in the organization

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Table -3 Response of the respondents regarding the assumption of fixed
assets valuation in the organization.
Response Number Percentage

Yes 25 92.5%

No 2 7.4%

Total 27 100%

As indicated in the above table 92.5% of respondents responded that


there is assumption of fixed asset valuation in the organization and 7.4
% of the respondent they do not know.
4.1 Fixed asset acquisition
Long lived tangible assets have a permanent nature, and used in the
operations of the business. But they are not held for sale in the ordinary
course of the business. They are classified on the balance sheet as fixed
assets. The properties most frequently included in fixed assets may be
described in more specific terms as equipment ,furniture , tools,
machinery, buildings and land. The cost of acquiring such an asset
includes all expenditures necessary to get it in place and ready for use.
According to the organizational account shows, fixed assets of the
organization are building, Tractors, bulldozers, trailers, machinery and
farm equipment, furniture, house holds and office, trucks and other
vehicles, work shop and garage tools and mills.

During purchase of such asset the organization include the necessary


expenditures pertaining with purchase of such asset in acquisition cost,
such are transportation, insurance while in transit and installation
casts. Thus, from the above findings the researcher concluded that the
principle of Accounting on acquisition of fixed asset is practical.

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Table 4 acquisition cost of fixed asset whether additional cost included
on acquisition cost or not
Responses Number Percentage

Yes 23 85.19%

No 4 14.8.1%

Total 27 100%

As indicated in the above table 85.19% of respondents responded


additional cost incurred during purchase of fixed asset included on the
cost of the asset and 14.81% of responded that they have no adequate
information or knowledge whether additional cost is included on the cost
of the acquisition. So, the researcher concluded that majority of the
respondent well informed about the additional cost during purchase.
4.2 Accounting for depreciation
As time passes all fixed assets in use with the exception of land lose their
capacity to provide services. Accordingly, the cost of such assets should
be transferred to the related expense account in an orderly manner
during their expected use full life.

Based on the researcher observation of financial data of the organization,


periodic cost expiration is in practice based on the estimated rate given
by the higher government body which has no accessibility to the plant
assets and any current information about the fixed assets.
Once the rates are estimated by the government, the management of the
organization did not revise periodically and also they are not adjusted for
the future periods.
Hence, based on the above findings the researcher concluded that there
is practice of cost expiration in the organization with ineffective manners.

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Table 5 response of respondents regarding depreciation expense whether
it is included on income statement or not.
Responses Number Percentage

Yes 26 96.3%

No 1 3.7%

Total 27 100%

As indicated on the table 96.3% of the respondent said that depreciation


expenses included in income statement and 3.7% responded that it is
not included in income statement. When depreciation expenses included
in income statement it has tax benefit which means due to inclusion of
depreciation there is a possibilities to pay low income tax.
4.3. Depreciation methods
As per the organizations financial rule and regulation the straight line
methods of depreciation is used for all fixed assets of the organization.
Factors which are considered for determination of depreciation in
straight line method are cost, estimated residual value and estimated
useful life.
From the results of questionnaire and the researcher’s personal
observation asses in financial data, percentage rate is used by the
organization for determination of depreciation expense. The rates used by
the Limmu coffee farm on all fixed assets are as follows.

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Tables Rates of deprecation
Plant Asset Rates %

Buildings 5

Varies store 5

Tractors Bulldozers and trailers 10

Machinery and farm equipment 12

Furniture, Hence hefts and office 10


equipment

Trucks and other vehicles 20

Work shop and garage tools 12

Mills 12

As can be seen from the above table, straight line rates are applied on all
fixed assets of the organization. In computing deprecation consideration
has to be given to the quantity and the cost of each unit of service
obtained. Accordingly, for assets that offer the same amount of service at
equal amount of lastly, the straight line of method depreciation is
considered appropriate. Even it is to apply different methods of
depreciation determination for its appropriations in light of the pattern of
service obtained from the fixed asset. So based on the assess of the
organization various document the researcher concluded that the
straight line method of deprecation is used in the organization.
So the computation of fixed asset based on straight lire which is the
application of fixed percentage given by government for example a
machine or building incur cost of 200,000 and the organization apply 5%

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rate to be deprecation expense for that period and it continually applied
up to the balance be come zero.

Table 6 Responses of the respondents concerning the depreciation


methods applied by the organization on their fixed Assets.
Responses Number of respondent Percentage

Straight line methods 27 100%

Others method - -

Total 27 100%

As indicated on the above table 100% the respondents responded the


straight line method is applied by the organization.
4.4 Revision of periodic Depreciation rate
When fixed asset is placed in service, from factors which must be
considered are useful life and residual value of the asset. At the time of
estimation, since underestimation or over estimation of the fixed Assets
life and residual value might occur. It is necessary to revise the
estimation periodically and allocate the depreciable costs of the assets
over the remaining useful life without affecting the amount of
depreciation expense recorded in earlier period. Despite the fact that,
based on the researchers personal assess of financial data of the
organization revision of periodic depreciation is not exercises in the
organization because of this reason high depreciation expense can be
occur on plant assets and directly it affects the financial position and
operating results of the organization.

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Table -7 Responses of the Respondents about whether the responsible
bodies revise depreciation rate when under state or over state of Assets
useful life.
Responses Number of respondent Percentage

Yes 3 11.11%

No 24 88.89%

Total 27 100%

As indicated on the above table 88.89% of respondents responded that


there were no responsible bodies to revise deprecation rate when under
state or over state assets useful life and 11.11% said that it is revised.
Also the researcher concluded that from the above table there is no
practice for revision of depreciation rate in the organization.

Table_8 responses of the respondents whether there are fixed assets fully
depreciated or not
Responses Number Percentage

yes 21 77.7%

no 6 22.22%

Total 27 100%

As indicated on the above table 77.78% of the responded that there are
assets fully depreciated and 22.22% said there are asset which simply
put because of obsolescence due to they replaced by advanced
technology. From the results the researcher concluded that fixed asset
of the organization are fully depreciated

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Table 9 Responses whether fixed assets are well maintained or not
Responses Number Percentage

Yes 25 92.6%

No 2 7.4%

Total 27 100%

As indicated on the above table 92.6% of the respondents replied that


there assets are well maintained and that of 7.4% replied there are asset
that were not well maintained because of administrative problem so the
researcher concluded that there is a practice of well maintaining the
fixed asset in the organization.
4.5 Depreciation recording and financial reporting
One of the objectives of financial reporting is disclosure of operations
results over a particulars period of time. To the extents that depreciation
is significant part of operations expense, and that operating expense are
relevant in various management decisions. After the depreciation
expense is determined, it is recorded as periodic expense and deducted
from the original cost of the Asset.
As the financial statement of the organization shows, all fixed assets of
the organization are reported on the balance sheet at cost and that cost
used for the determination of periodic depreciation expense and recorded
the determined deprecation expense periodically by an account called
accumulated depreciation for a particular fixed asset. Thus based on the
finding, the researcher concluded that there is the practice of recording
periodic depreciation and also reporting of fixed asset at cost on the
balance sheet in the organization.

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CHAPTER FIVE
Summary of findings conclusion and recommendation
5.1 Summary of findings
In this section, major findings are high lighted correlating with objective
of the study. The research paper is conducted to assess the fixed asset
valuation methods in Limmu coffee farm. The method of data collection
used by the researcher in this study were both primary and secondary
Data. Primary data was mainly collected through spreading
questionnaire to the group of stratum. Secondary data was collected from
the organizations financial reports and manuals. Based on this the study
has come up with the following findings,
As shown in the result and discussion part the fixed assets of the
organization are building, various stores, tractors, bulldozers, trailers.
Machinery and farm equipments, furniture, house holds and office
equipments, trucks and other vehicles, workshops and garage tools, and
mill.

The organization is applying the concept of fixed asset valuation by


including all the necessary expenditures in acquisition cost of particular
assets. From the result the researcher concluded that the organization
determined deprecation expenses for its fixed assets.
In determination of deprecation expense, straight line or fixed percentage
applied on all fixed assets of the organization and concerning the
determination of economic life and residual value there is no
determination for it i.e simply applying the rate on the cost of the asset.
Also deprecation expense is calculated in the farm by a fixed percentages
stated by the government without making necessary adjustment. There
is no revision of periodic deprecation in the organization.

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5.2 Conclusion
In this study the researcher tried to see how the fixed assets acquisition
and determination of estimating their use full life and residual value
activities are applied in different literatures.

The acquisition cost determination of fixed asset of the organization is as


per GAAP i.e. the necessary expenditures incurred for its acquisition is
included in acquisition cost of fixed assets. The method used by the
organization for calculation of deprecation is a straight line by applying a
fixed percentages provided by the government. The way of reporting of its
fixed asset and expired cost is also as per the principle. The main
deficiency or problem which currently shown in the organization in
determining depreciable expense is that the management of the
organization does not estimate the economic life and residual value of
their fixed asset in relations with the status of fixed asset’s current
situation. The fixed percentages for its fixed assets are not stated by the
management body which has accessibility to the fixed assets.

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5.3 Recommendation
As shown in the earlier section the government body estimate percentage
rate for fixed asset of the organization so it should relates with the status
of fixed assets current situation. So, at the time of estimating the rate the
responsible body should consider the current situation of fixed asset like
physical wear and tear of the fixed asset and the current situation of
similar fixed asset in use.

The fixed percentages which has been set by the higher body should be
set accompanying with organizations management at the site of
operation. Because of their accessibility to the fixed assets, the necessary
information can be included in estimation of the rates.

The organization should not apply single method of depreciation for all
fixed assets. So, the selection of depreciation method should be
applicable with the nature of services get from the fixed assets. The
organization should revise the periodic deprecation method and other
issue related to depreciation.

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Reference

 Fees and warren (1989): principle Accounting 16th edition; Richard


U. Irwine.
 Kieso (1986): Intermediate accounting 6th edition, U.S.A
 Larson (1990) Fundamental Accounting 12th edition
 Mosich A.N (1998) Intermediate Accounting MC Graw-Hiu Book
company.
 Warren, Fess, Reeve (1996) 18th edition.
 Weygant, kiesso, kimmel (1999) principle of Accounting 5th
edition, US.A.

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Appendix

JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING

Dear respondent the purpose of these questionnaires is to collect data


about fixed asset valuation methods and way of reporting on financial of
Limmu coffee plantation.

1. Background of the respondent

a. Age 0
b. Education:- Degree 0 Diploma 0 Grade 12 Complete 0
Certificate 0
2. What is your position in these organization?
__________________________________________________________________
3. How long you have been stayed at this position?

__________________________________________________________________

4. What are the fixed assets used when your organization produce
products ? Specify
__________________________________________________________________
_________________________________________________________________
5. Does your organization apply the concept of fixed asset valuation?

Yes 0 No 0
6. If Yes, what is the assumption (or concepts) on fixed asset
valuation in your organization? Specify

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__________________________________________________________________
__________________________________________________________________

7. During purchase of fixed assets the organization expends in


addition to the purchasing price of the asset so are those
expenditures included in the acquisition cost of the fixed asset?

Yes 0 No 0
8. How do you match the costs of fixed assets with revenue over the
benefit period?
__________________________________________________________________
__________________________________________________________________
9. Is the amount of residual value of fixed assets estimated at the
date of purchase approximately equal to its scrap or salvage vale
as of the estimated date of disposal

Yes 0 No 0
10.If yes, how is estimated?
________________________________________________________________
11. If no, why?
_________________________________________________________________
12. who are the responsible bodies that estimate the residual value of the
fixed assets?
____________________________________________________________________
13. At the time of estimating the useful life of fixed assts, what factors
that the responsible bodies considers?
_________________________________________________________________
14. Does your organization include depreciation expense in profit and
loss statement?

Yes 0 No 0
15. How depreciation is computed on your fixed assets?

Straight line method 0

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Production methods 0
Declining balance method 0
Sum of years digit methods 0
If only one type for all fixed asset specify it _________________

16. If the answer for question number 15 is only one type, is it applicable
for all fixed assets?

Yes 0 No 0
17. If Yes, why? _________________________________________________

________________________________________________________________

18. Are the responsible bodies revise depreciation rate of fixed assets
when under estimate or over estimate of assets useful life occurs?

Yes 0 No 0
19. If No, why? __________________________________________________

___________________________________________________________________

20. Are there fixed assets that were fully depreciated?

Yes 0 No 0
21. If Yes, what are they?

_____________________________________________________________

22. How do you manage fully depreciated fixed assets? Specify

________________________________________________________________________
________________________________________________________________________
23. Are the fixed assets well maintained ?
Yes No
24. If yes, how do you manage this expenditure?
________________________________________________________________________
_______________________________________________________________________

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