1.2. KK Limited owns a property that is used as its head office in Pretoria. On 1st January 2020, its carrying value was R20 million and its remaining useful life was 20 years. On 1st July 2020, the business recognized cheaper premises found for use as the head office. It was therefore decided to lease the property under an operating lease. The property was valued by a qualified professional who assessed the property’s value as R21 million on 1st July and R21.6 million on 31st December 2020. Explain the accounting treatment of the property in the financial statements for the year ended 31st December 2020. (Hint: Income statement and SOFP extract including calculations
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1.2. KK Limited owns a property that is used as its head office in Pretoria. On 1st January 2020, its carrying value was R20 million and its remaining useful life was 20 years. On 1st July 2020, the business recognized cheaper premises found for use as the head office. It was therefore decided to lease the property under an operating lease. The property was valued by a qualified professional who assessed the property’s value as R21 million on 1st July and R21.6 million on 31st December 2020. Explain the accounting treatment of the property in the financial statements for the year ended 31st December 2020. (Hint: Income statement and SOFP extract including calculations
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- 1.2)KK Limited owns a property that is used as its head office in Pretoria. On 1st January 2020, itscarrying value was R20 million and its remaining useful life was 20 years. On 1st July 2020, thebusiness recognized cheaper premises found for use as the head office. It was therefore decidedto lease the property under an operating lease. The property was valued by a qualifiedprofessional who assessed the property’s value as R21 million on 1st July and R21.6 million on31st December 2020. Explain the accounting treatment of the property in the financialstatements for the year ended 31st December 2020. (Hint: Income statement)1.2)KK Limited owns a property that is used as its head office in Pretoria. On 1st January 2020, itscarrying value was R20 million and its remaining useful life was 20 years. On 1st July 2020, thebusiness recognized cheaper premises found for use as the head office. It was therefore decidedto lease the property under an operating lease. The property was valued by a qualifiedprofessional who assessed the property’s value as R21 million on 1st July and R21.6 million on31st December 2020. Explain the accounting treatment of the property in the financialstatements for the year ended 31st December 2020. Income statement already included below...SOP required Income statement: Calculation of carrying amount of property as on 1st July:- Particular amount Carrying amount as on 1st July $20 million Remaining life 20 years Depreciation ($20/20 years) 1 million per year Depreciation from 1st January to 1st July: Depreciation for 6 month 0.50 million Carrying value of…KK Limited owns a property that is used as its head office in Pretoria. On 1st January 2020, itscarrying value was R20 million and its remaining useful life was 20 years. On 1st July 2020, thebusiness recognized cheaper premises found for use as the head office. It was therefore decidedto lease the property under an operating lease. The property was valued by a qualifiedprofessional who assessed the property’s value as R21 million on 1st July and R21.6 million on31st December 2020. Explain the accounting treatment of the property in the financialstatements for the year ended 31st December 2020. (Hint: Income statement and SOFP extractincluding calculations).
- TIA Bhd paid RM9,000,000 on 1 January 2016 to purchase a building for capital appreciation. The fair value of the building on 31 December 2016 and 31 December 2017 were RM16,000,000 and RM11,000,000, respectively. On 30 June 2018, TIA Bhd decided to use this building as an administrative office. The remaining useful life of the office building on 30 June 2018 is 8 years. The fair value of the building on 30 June 2018 was RM14,000,000. However, due to financial problem, TIA Bhd sold this building on 30 June 2019 for RM15,500,000. TIA Bhd adopted fair value model for investment property and revaluation model for owner occupied property. The straight-line method has been used by TIA Bhd to calculate depreciation for the fixed asset. TIA Bhd closes its account on 31 December every year.REQUIRED:(a) Prepare all journal entries for the year 2016, 2017, 2018 and 2019.(b) Explain the accounting treatment for the derecognition of investment propertyMannenberg Ltd is a manufacturing company and its year-end is 31 December 2020. The following de tails are available relating to its fixed property: 1. Mannenberg Ltd acquired land, with an office building on 1 January 2020 for R3 000 000 cash (Land: R1 000 000, Building: R2 000 000). Mannenberg also paid agents commission of R45 000 and legal fees of R15 000.2. For the period from 1 January 2020, Mannenberg Ltd made improvements to the building amounting to R100 000. The subsequent expenditure meets the subsequent recognitioncriteria, as contained in IAS 40.3. The land and buildings were available for use and rented out to the tenant on31 March 2020. The tenant took occupation of the building on 1 April 2020.4. At year-end, Mr Content, an independent sworn appraiser revalued the land at R1 620 000 and the building at R3 000 000. Mannenberg Ltd values investment property using fair value model, in terms of IAS 40. REQUIRED:Disclose the above-mentioned information in the statement of…Mannenberg Ltd is a manufacturing company and its year-end is 31 December 2020. The following details are available relating to its fixed property: 1. Mannenberg Ltd acquired land, with an office building on 1 January 2020 for R3 000 000 cash (Land: R1 000 000, Building: R2 000 000). Mannenberg also paid agent’s commission of R45 000 and legal fees of R15 000. For the period from 1 January 2020, Mannenberg Ltd made improvements to the building amounting to R100 000. The subsequent expenditure meets the subsequent recognition criteria, as contained in IAS 40. The land and buildings were available for use and rented out to the tenant on 31 March 2020. The tenant took occupation of the building on 1 April 2020. At year-end, Mr Content, an independent sworn appraiser revalued the land at R1 620 000 and the building at R3 000 000. Mannenberg Ltd values investment property using fair value model, in terms of IAS 40. REQUIRED: Disclose the above-mentioned information in the statement…
- Tina Aisyah Sdn. Bhd paid RM9,000,000 on 1 January 2016 to purchase a building for capital appreciation. The fair value of the building on 31 December 2016 and 31 December 2017 were RM16,000,000 and RM11,000,000, respectively. On 30 June 2018, Tina Aisyah Bhd decided to use this building as an administrative office. The remaining useful life of the office building on 30 June 2018 is 8 years. The fair value of the building on 30 June 2018 was RM14,000,000. However, due to financial problem, Tina Aisyah Bhd sold this building on 30 June 2019 for RM15,500,000. Tina Aisyah Sdn. Bhd adopted fair value model for investment property and revaluation model for owner occupied property. The straight-line method has been used by Tina Aisyah Bhd to calculate depreciation for the fixed asset. Tina Aisyah Sdn. Bhd closes its account on 31 December every year. REQUIRED: Prepare all journal entries for the year 2016, 2017, 2018 and 2019. After initial recognition, MFRS 140 Investment Property…On 1 May 2021, Topdog Ltd. buys and puts into service an item of specialised equipment to increase the production capacity of its Property, Plant and Equipment. Details of the new equipment item are: Cost $314,000 Estimated residual value $14,000 Estimated useful life = 10 years (to be used equally over its life) The equipment will be purchased by issuing 110,000 shares at $1 each and borrowing the remaining amount. The loan will be repaid in a lump sum in 2025. The interest of 10% p.a. will be paid at the end of each 6 months after the purchase of the equipment. Topdog Ltd. failed to record the new equipment in the 30 June 2021 annual financial statements. Management discovered the omission in October 2021 and decided that the omission is material. Required: Prepare the journal entries in October 2021 to record the omitted information. Explain the change (including amounts) to Topdog Ltd’s net profit, total assets, total liabilities and total equity after the correction of…(b) Zahir Berhad has the following assets on 31 December 2019. (i)A moulding machine with a carrying value of RM1.25 million. At 31 December 2019, the company stopped using the machine as it recently acquired an up-to-date moulding machine. The company keeps the machine and care for its maintenance just in case it would be needed as a backup. On 15 February 2020, company’s client has offered to buy the machine for RM1.1 million and the sale was completed in March 2020. (ii)A property which is currently advertised through a major estate agent in Serdang for sale at RM4 million. The property was listed for sale in November 2019 and so far no buyer has been found. The company is hopeful of a sale. On 14 January 2020, an offer of RM3.9 million was received for the property and the sale was completed on 28 February 2020. The financial statements were authorised for issue on 10 March 2020. Required: Explain the accounting treatment as per requirement under MFRS 5 Non-Current Assets Held for…
- During the year 2020, Akasia Maju Bhd (AMB) purchased a piece of land with an existing building for RM1,125,000. The land was valued at RM1,050,000 and the building at RM75,000. AMB demolished the building and constructed a new building as headquarters on the site. The new building and land improvement are expected to last for 80 years with no residual value and the construction was fully completed by the end of the year 2020. The following represents the various items related to the project in year 2020: Items RM Lawyer’s fee to close the purchase deal 22,500 Cost of land fill and clearing 18,000 Architect’s fee 120,000 Fencing around the land 60,000 Cost of demolishing existing building 97,500 Interest on financing of construction paid during construction 282,000 Receipts from sale of demolition scraps 15,000 Construction costs 1,200,000 Landscaping (trees and shrubs) 30,000 Parking lots and concrete walks on the…DO NOT GIVE ANSWER IN IMAGE FORMAT On the 1st January 2018, Alpha Company sells a building to Omega Ltd for £1,000,000 cash. The carrying amount of the building prior to the sale was £750,000. Alpha arranges to lease the building back for 5 years at £150,000 per annum, payable in arrears. The remaining useful life of the building is 25 years. The transaction satisfies the performance obligations in IFRS 15, so will be accounted for as a sale and leaseback transaction. At the date of sale, the fair value of the building was £900,000, and the implied interest rate is 10%. In relation to Alpha Company: (a) How much of the lease liability relates to the actual terms of the lease, and how much relates to additional financing received? (b) What is the right-of-use value of the building? (c) What is the value of the gain on the transfer of the rights transferred due to the selling price being higher than the fair valueHan, Inc. owns a building purchased on January 1, 2016 for P100 million. The building was used as the company’s head office. The building has an estimated useful life of 25 years. In 2020, the company transferred its head office and decided to lease out the old building. Tenants began occupying the old building by the end of 2020. On December 31, 2020, the company reclassified the building as investment property to be carried at fair value. The fair value on the date of reclassification was P70 million. How much should be recognized in the 2020 profit or loss as a result of the transfer from owner-occupied to investment property?