Donahue Ltd purchased a plant on 1 July 2018 for N$300 000.The entity incurred transfer fees...

  

Transcribed Image Text:

Donahue Ltd purchased a plant on 1 July 2018 for N$300 000.The entity incurred transfer fees of N$90 000. The expected dismantling cost at the end of the useful life of the plant is N$200 000. • The applicable discount rate after tax (tax rate 25.75%) • Useful life 6.3% 12 years The plant is erected on rented premises and the rental agreement requires dismantling of the plant at the end of its useful life. Assume that Inland Revenue services gives a 25% allowance on the plant and allows a deduction when dismant ling costs are paid. The dismantling costs are reassessed on 1 July 2019 at NS220 000. Required: 1.1 Prepare journal entries relating to the change in dismant ling cost estimate on 1 6 July 2019 Donahue Ltd purchased a plant on 1 July 2018 for N$300 000.The entity incurred transfer fees of N$90 000. The expected dismantling cost at the end of the useful life of the plant is N$200 000. • The applicable discount rate after tax (tax rate 25.75%) • Useful life 6.3% 12 years The plant is erected on rented premises and the rental agreement requires dismantling of the plant at the end of its useful life. Assume that Inland Revenue services gives a 25% allowance on the plant and allows a deduction when dismant ling costs are paid. The dismantling costs are reassessed on 1 July 2019 at NS220 000. Required: 1.1 Prepare journal entries relating to the change in dismant ling cost estimate on 1 6 July 2019

Answer rating: 100% (QA)

Working Note 1 The Disamntaling cost recorded in the books of account on 1st July ... View the full answer