Vambo Limited is a manufacturing company listed on the Namibia Stock Exchange. The carrying amounts of...
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Vambo Limited is a manufacturing company listed on the Namibia Stock Exchange. The carrying amounts of tangible assets of the company were as follows: Land (Note 1) Office buildings (Note 2) Industrial buildings (Note 3) Machinery (Note 4) Additional information: 31 December 2021 N$ 4 500 000 1 800 000 3 520 000 1 950 000 31 December 2020 N$ 4 000 000 1 472 000 3 840 000 2 900 000 1. Land is vacant and is classified as investment property and accounted for on the fair value model in accordance with IAS 40 Investment Property. The land was acquired on 1 June 2020 at N$3 500 000. The fair value adjustments were recorded at the respective year-ends. FACULTY OF COMMERCE, MANAGEMENT AND LAW 2. Office buildings are carried on the revaluation model. It was revalued for the first time on 31 December 2021 to its fair value of N$1 800 000. The office buildings were acquired on 1 July 2020 at N$1 500 000 and are depreciated on the straight-line basis over 25 years to the residual value of N$100 000. In 2020 management expected to use the asset up to the end of its economic life. In 2021 the estimated useful life changed to 5 years (applied prospectively as from 2 January 2021) and the residual value to N$400 000 (change in estimate also applied prospectively as from 2 January 2021). The company uses the re-allocation method to account for changes in estimates. However, in December 2021 management changed their intention and decided to sell the building. No capital allowances are available for office buildings. Ignore IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations. 3. Industrial buildings are measured using the cost model and are depreciated on the straight-line basis over 15 years. An allowance of 5% applies to the industrial buildings in terms of the Income Tax Act. These buildings were bought on 1 January 2018 for an amount of N$4 800 000. The residual value was and is estimated to be N$nil. No further buildings have been acquired since then. 4. The machinery is carried at the cost model. The Wear and tear allowance of 33 1/3% applies to plant and machinery in terms of the Income Tax Act. Plant and machinery are depreciated on the straight-line basis at 20% per year to N$nil residual value. The tax base of the remaining machinery amounted to N$950 000 at 31 December 2021. The tax base was N$1 900 000 on 31 December 2020. No additional machinery was acquired in 2021. Vambo Limited is a manufacturing company listed on the Namibia Stock Exchange. The carrying amounts of tangible assets of the company were as follows: Land (Note 1) Office buildings (Note 2) Industrial buildings (Note 3) Machinery (Note 4) Additional information: 31 December 2021 N$ 4 500 000 1 800 000 3 520 000 1 950 000 31 December 2020 N$ 4 000 000 1 472 000 3 840 000 2 900 000 1. Land is vacant and is classified as investment property and accounted for on the fair value model in accordance with IAS 40 Investment Property. The land was acquired on 1 June 2020 at N$3 500 000. The fair value adjustments were recorded at the respective year-ends. FACULTY OF COMMERCE, MANAGEMENT AND LAW 2. Office buildings are carried on the revaluation model. It was revalued for the first time on 31 December 2021 to its fair value of N$1 800 000. The office buildings were acquired on 1 July 2020 at N$1 500 000 and are depreciated on the straight-line basis over 25 years to the residual value of N$100 000. In 2020 management expected to use the asset up to the end of its economic life. In 2021 the estimated useful life changed to 5 years (applied prospectively as from 2 January 2021) and the residual value to N$400 000 (change in estimate also applied prospectively as from 2 January 2021). The company uses the re-allocation method to account for changes in estimates. However, in December 2021 management changed their intention and decided to sell the building. No capital allowances are available for office buildings. Ignore IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations. 3. Industrial buildings are measured using the cost model and are depreciated on the straight-line basis over 15 years. An allowance of 5% applies to the industrial buildings in terms of the Income Tax Act. These buildings were bought on 1 January 2018 for an amount of N$4 800 000. The residual value was and is estimated to be N$nil. No further buildings have been acquired since then. 4. The machinery is carried at the cost model. The Wear and tear allowance of 33 1/3% applies to plant and machinery in terms of the Income Tax Act. Plant and machinery are depreciated on the straight-line basis at 20% per year to N$nil residual value. The tax base of the remaining machinery amounted to N$950 000 at 31 December 2021. The tax base was N$1 900 000 on 31 December 2020. No additional machinery was acquired in 2021.
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Answer 1 For the land Vambo Limited recorded the acquisition cost of N3 500 000 as the carrying amount on 1 June 2020 At the end of 2021 the fair value of the land was N4 500 000 which is higher than ... View the full answer
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