Question 2.

1
Property Plant and Equipment
Notes for the year ended 30 June 2017 Land Buildings Machinery
Carrying amount at 1 July 2016 2,200,000.00 3,285,511.00
Cost (W1) 2,200,000.00 3,400,000.00
Accumulated depreciation (W2) (114,489.00)
Additions 1,692,000.00
Revaluation (W3) (W4) 600,000.00 250,518.00
Depreciation (W5) (96,029) (253,800.00)
Transfer to investment property 1,300,000.00 1,600,000.00

Carrying amount at 30 June 2017 1,500,000.00 1,840,000 1,438,200.00

Cost / gross carrying amount 1,500,000.00 1,896,029.00 1,692,000.00

Accumulated depreciation 56,029.00 253,800.00

 Valuations were performed on 30 June 2017 by an independent sworn appraiser

 The Carrying amount of land and Buildings if it was carried at cost minus accumulated
depreciation would have amounted to 3,085,200.00 (Land: 1,400,000.00 & Buildings:
1,685,200.00).

Question 2.2
Deferred Tax
Analysis of temporary differences

Revaluation:
Manufacturing land (1 00 000 x 80% x 28%) 22,400.00
161629 43,344.00
Manufacturing building (161629 − 25∗12−16 ∗ 12) ∗ 28%

Accelerated tax allowance (1 685 200 - 1 800 000 x 85%) x 28% 43,456.00

Deferred tax liability at the end of year 10,9200.00

CALCULATIONS

(Working 1)

Accumulated Depreciation Beginning of the Year

Manufacturing Property
1 March 2015- 30 June 2015 = 4 months
1 July 2015- 30 June 2016 = 12 months
16 months

1 800 000 − 570 000 16

∗ = 𝟔𝟓𝟔𝟎𝟎
25 12

Administration Property

1 August 2015 to 30 June 2016 = 11 months

1 600 000 − 0 11
∗ = 𝟒𝟖𝟖𝟖𝟗
30 12

Total Accumulated Depreciation

65 600 + 48 889 = 114 489

(Working 2)

Land at Cost Beginning of Year (1 400 000 +800 000) 2,200,000.00

Buildings at Cost Beginning of Year (1 800,000+1 600 000) 3,400,000.00

(Working 3)

Depreciation / Revaluation Current year

Land (1 500 000 - 1 400 000) + (1 300 000 - 800 000) 600,000.00

(Working 4)
 Manufacturing Property
Net Replacement Value @ 30 June 2017 1,840,000.00
1840000−570000 56,029.00
Add Depreciation ( ∗ 12)
25∗12−16−12

Gross Carrying Amount @1 July 2016 1,896,029.00

Carrying Amount @1 July 2016 (1 800 000 - 65 600) 1,734,400.00

Revaluation Surplus 161,629.00

Administrative Property
Carrying Amount @ 1 July 2016 (1 600 000 - 48 889) 1,551,111.00
1600000 9 40,000.00
Depreciation Current Year ( ∗ 12)
30

Carrying Amount @ 1 April 2017 1,511,111.00

Net Replacement Value @ 1april 2017 1,600,000.00

Revaluation Surplus 88,889.00

161629
Therefore total revaluation: + 88889

250518

(Working 5)

Total Depreciation: 56029 + 40000 = 96 029

(Working 6)

Cost 1 800 000

Accumulated depreciation @ 1 July 2017 (65 600)
Depreciation (49 200)

1 685 200

(Working 7)
Machinery @ Cost: 665 000 + 350 000 + 8 000 = 1 692 000

b) Journal Entries

Dr Cr
Investment Property (SFP) 1 300 000
Revaluation Surplus (OCI) 500 000
Land (SPF) 800 000
Revaluation of land and transfer to Investment Properties
Depreciation (P/L) (1600000/30*9/12) 40 000
Accumulated Depreciation (SPF) 40 000
Depreciation expense for the year
Investment Property 160 000
Building 160 000
Accumulated Depreciation (400 00 + 48 889) 88 889
Revaluation Surplus 88 889
Revaluation of building and transfer to Investment property
Deferred tax 131 911
Revaluation Surplus (500000x80% x28% + 88889x80x28%) 131 911
Deferred tax on Revaluation of administrative Land and
Buildings