Green Peak Trading is a property development company. You have been approached by the accountant, Ms...
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Green Peak Trading is a property development company. You have been approached by the accountant, Ms Not Sure, for advice on IAS 40, Investment Property in relation to the transactions listed below. The company year-end is December. Property 1 On the 1* of April 2022, the floods in KZN, damaged the property on which the company's head-office was situated in Westville, KZN. The head office had to be relocated to another property based in the Musgrave area. This property was previously let to tenants under an operating lease. The fair values of the Musgrave property were as follows: 31 December 2021 1st April 2022 As at 1" of April 2022: -The land element of the property if R5 040 000 - The property had an estimated useful life of 20 years. R21 420 000 R21 840 000 Property 2 On 30th November 2022, Green Peak Trading decide to sell two of its investment properties. Below are the details for these 2 properties: Details Fair Value 31 December 2021 Fair Value 31 December 2022 Amarock (based in Umhlanga) R' 12 600 000 11 760 000 Ezulwini (Based on the South Coast) R' 16 800 000 17 220 000 The Amarock Property is to be sold after re-development. Redevelopment commenced on the 30th November 2022. The Ezulwini Property is to be sold without redevelopment. Property 3 During 2022, two new investment properties were bought for a total of R71 400 000. Legal and transfer duty costs totaled an amount of R1 680 000. The company uses the cost model for Property, Plant & Equipment, and the fair vale model for Investment Property. All properties measured under the cost model are depreciated on a straight-line basis over the asset's useful life. The combined fair value of the investment properties is as follows: Details 31 December 2021 31 December 2022 Combined Fair value R' 420 000 000 525 000 000 1. REQUIRED QUESTION 1 Explain how issues 1, 2 and 3 sssshould be accounted for in the financial statements of Green Peak Trading for the year ended 31 December 2022. Property 1 Property 2 Property 3 Green Peak Trading is a property development company. You have been approached by the accountant, Ms Not Sure, for advice on IAS 40, Investment Property in relation to the transactions listed below. The company year-end is December. Property 1 On the 1* of April 2022, the floods in KZN, damaged the property on which the company's head-office was situated in Westville, KZN. The head office had to be relocated to another property based in the Musgrave area. This property was previously let to tenants under an operating lease. The fair values of the Musgrave property were as follows: 31 December 2021 1st April 2022 As at 1" of April 2022: -The land element of the property if R5 040 000 - The property had an estimated useful life of 20 years. R21 420 000 R21 840 000 Property 2 On 30th November 2022, Green Peak Trading decide to sell two of its investment properties. Below are the details for these 2 properties: Details Fair Value 31 December 2021 Fair Value 31 December 2022 Amarock (based in Umhlanga) R' 12 600 000 11 760 000 Ezulwini (Based on the South Coast) R' 16 800 000 17 220 000 The Amarock Property is to be sold after re-development. Redevelopment commenced on the 30th November 2022. The Ezulwini Property is to be sold without redevelopment. Property 3 During 2022, two new investment properties were bought for a total of R71 400 000. Legal and transfer duty costs totaled an amount of R1 680 000. The company uses the cost model for Property, Plant & Equipment, and the fair vale model for Investment Property. All properties measured under the cost model are depreciated on a straight-line basis over the asset's useful life. The combined fair value of the investment properties is as follows: Details 31 December 2021 31 December 2022 Combined Fair value R' 420 000 000 525 000 000 1. REQUIRED QUESTION 1 Explain how issues 1, 2 and 3 sssshould be accounted for in the financial statements of Green Peak Trading for the year ended 31 December 2022. Property 1 Property 2 Property 3
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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