Shipengo Limited owns two buildings as follows: - a head office building located in Windhoek; and -

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Question:

Shipengo Limited owns two buildings as follows:
- a head office building located in Windhoek; and
- another office building located in Rehoboth
Windhoek building
- The office building located in Windhoek is used as Shipengo Limited’s head office.
- The building was purchased on 1 January 2015 at a cost of N$ 1 200 000.
- A fire broke out on 30 June 2015, and completely destroyed this building.
Rehoboth building
- The property in Rehoboth was leased under an operating lease to a tenant, Kapana Limited. Kapana Limited was paying a monthly rental of N$ 15 000. After the fire, Shipengo Limited urgently needed new premises for its head office. Since Kapana Limited was always late in paying their lease rentals, Shipengo Limited decided to immediately evict them and move their head office to this building situated in Rehoboth.
- The building in Rehoboth was purchased on 1 January 2015 for N$ 500 000.
- On 30 June 2015, the fair value of the building in Rehoboth was N$ 950 000.
- There was no change in fair value at 31 December 2015.
- The total useful life was estimated to be 10 years from the date of purchase and the residual value was estimated to be nil.
Shipengo Limited uses:
- The cost model to measure its property, plant and equipment; and
- The fair value model for its investment properties
- Buildings are depreciated over 10 years.
REQUIRED
a) Define “investment Property” and “owner occupied property”. 4
b) Journalise the above transactions in the books of Shipengo Limited for the year ended 31 December 2015. Journal narrations are not required 18
c) Disclose the investment property note and the profit before tax note in Shipengo Limited’s financial statements for the year ended 31 December 2015. 8