a) Mint Ltd acquired a building on 1 January 2018 for 400,000. The depreciation policy for...

Transcribed Image Text:

a) Mint Ltd acquired a building on 1 January 2018 for £400,000. The depreciation policy for Mint Ltd for buildings is the straight-line method with a rate of 10% per annum, with no residual. The useful cconomic life of the building remains unchanged as at the end of 2021. The valuations of the building are given as follows: Date Valuations £ 31 Dec 2018 500,000 650,000 1,000,000 1,000,000 31 Dec 2019 31 Dec 2020 31 Dec 2021 Required: Show how the building would have been accounted for using the fair value method in the financial statements of Mint from 2018 to 2021. Mint revalues its assets every year. Show how the building would have been accounted for in the financial statements of Mint Ltd from 2018 to 2021 using the cost method and with Mint choosing to revalue the building on 1 January 2021 for the first time. (7 marks) b) Primrose Ltd.'s year end is 31 December 2021. On 5 January 2022, an accidental fire destroyed the factory completely. The loss to the company from the fire is £900,000, which is deemed material for the company. Required: What are 'events after the reporting period"? How should Primrose Ltd. account for the fire? Your answer to this part of the question should not be more than 90 words. (3 marks) c) Wrexham Ltd. purchased a machine for £50,000 on 1 January 2019. The machine has a useful economic life of three years, with a scrap value of £5,000. The company's policy is to depreciate non-current assets on a straight-line basis. The company also expects to make profits of £42,000 every year from 2019 to 2022. The corporation tax rate for all years is 20%. The capital allowance on non-current assets for tax purposes for 2019 is £19,500, for 2020 is £13,500, and for 2021 is £12,000. The company has a 31 December year-end. Required: Calculate (ignore the time value of money): i) The deferred tax charge for all three years; ii) The provision for deferred tax that should be recorded in the Statement of Financial Position for each year. (6 marks) iii) Briefly compare the advantages and limitations of deferred tax. a) Mint Ltd acquired a building on 1 January 2018 for £400,000. The depreciation policy for Mint Ltd for buildings is the straight-line method with a rate of 10% per annum, with no residual. The useful cconomic life of the building remains unchanged as at the end of 2021. The valuations of the building are given as follows: Date Valuations £ 31 Dec 2018 500,000 650,000 1,000,000 1,000,000 31 Dec 2019 31 Dec 2020 31 Dec 2021 Required: Show how the building would have been accounted for using the fair value method in the financial statements of Mint from 2018 to 2021. Mint revalues its assets every year. Show how the building would have been accounted for in the financial statements of Mint Ltd from 2018 to 2021 using the cost method and with Mint choosing to revalue the building on 1 January 2021 for the first time. (7 marks) b) Primrose Ltd.'s year end is 31 December 2021. On 5 January 2022, an accidental fire destroyed the factory completely. The loss to the company from the fire is £900,000, which is deemed material for the company. Required: What are 'events after the reporting period"? How should Primrose Ltd. account for the fire? Your answer to this part of the question should not be more than 90 words. (3 marks) c) Wrexham Ltd. purchased a machine for £50,000 on 1 January 2019. The machine has a useful economic life of three years, with a scrap value of £5,000. The company's policy is to depreciate non-current assets on a straight-line basis. The company also expects to make profits of £42,000 every year from 2019 to 2022. The corporation tax rate for all years is 20%. The capital allowance on non-current assets for tax purposes for 2019 is £19,500, for 2020 is £13,500, and for 2021 is £12,000. The company has a 31 December year-end. Required: Calculate (ignore the time value of money): i) The deferred tax charge for all three years; ii) The provision for deferred tax that should be recorded in the Statement of Financial Position for each year. (6 marks) iii) Briefly compare the advantages and limitations of deferred tax.

Answer rating: 100% (QA)

situation1 date 1Jan18 DrBuilding 400000 Cr Accounts payable 400000 carrying amc 2018 360000 31Dec18 ... View the full answer