Observations on PPE

Clearview is involved with the manufacture of glasses and retail sales of glasses and contact lenses. The following points related to the PPE account balance were noted for Clearview: The range of glasses Clearview manufactures requires specialized machinery. Clearview leases most of the machinery but there are a few machines that it owns. During the year Clearview bought some machinery which was not available on lease. These came with a 60 day exchange and return clause. Whenever new machinery is bought, the old machinery is sold through an open auction with terms as is. The buyer is responsible for the shipping and transport of the machinery. Clearview recently returned new machinery after exchanging it twice. It now plans to buy the same machinery from a different vendor. Clearviews depreciation policy is to charge depreciation starting the month in which the machinery is delivered. Last year Clearview took a loan from the bank by placing one of its manufacturing plants as collateral for the loan. The loan was repaid during the year itself. It is a normal practice at Clearview to take loans from the bank by placing an asset as collateral and then repaying it as per the repayment schedule. It is learned that Clearview is again planning to get a loan from the bank in the same manner.