UNIT 2 ASSIGNMENT - MARCH 2024 QUESTION PAPER QUESTION (25 MARKS) (37.5 MINUTES WRITING TIME) Mint Condition Motors (Pty) Ltd (henceforth "Mint") is a second-hand car dealer with its headquarters on Ondekkers Road in Johannesburg. The company has a 31 December year-end. Delivery Truck Mint owns a delivery truck which is made up of a truck body and a truck trailer. The delivery truck was purchased at a total cost of R900 000 on 1 January 2018. At that date, R600 000 of the purchase cost was allocated to the truck body and R300 000 was allocated to the truck trailer. The truck body has a total estimated useful life of 10 years and a R200 000 residual value. The truck trailer has a total estimated useful life of 20 years and a residual value of R50 000. The delivery truck suffered an accident and the truck trailer was damaged during the 2021 financial year. The truck trailer was impaired by R40 000 on 31 December 2021. On 1 April 2022, Mint replaced the truck trailer with a new bigger truck trailer. The old truck trailer was sold for R280 000 cash on 1 April 2022. To enhance the power and fuel economy of its truck body, Mint installed a heavy-duty turbo into its engine on 31 December 2022. The total cost to install the turbo amounted to R120 000 cash paid on that day. This installation is expected to significantly decrease the fuel consumption of the truck body. There was no change to estimates of the useful lives and residual values of the assets above during the period under review. Buildings On 1 January 2016 Mint purchased the two floors of a 5-floor building on Ontdekkers Road (ground floor and first floor). Mint paid a total of R2 600 000 for the two floors. The total cost of R2 600 000 is split equally between the floors. The floors had an estimated total useful life of 40 years on 1 January 2016 and a nil residual value. These estimates have remained unchanged. Since 1 January 2016, Mint has used the ground floor of the building as a showroom for its vehicles and to house its offices. The first floor has always been rented out to third parties. The other three floors of the building are not owned by Mint. One of the floors has been owned by an accounting firm for the last 10 years. The floors in the building can be sold separately and regularly change ownership. Another of the floors was recently bought by an advertising agency. The top floor is in the process of being sold to a consulting firm. Parking lot (Land) Mint purchased a site of land next to the Ontdekkers Road dealership on 1 February 2019. The land was purchased at a cost of R180 000. Mint uses the land as a parking lot for its customers and as an additional space for displaying some of its vehicles. The parking lot is undeveloped land and has an unlimited useful life. The parking lot has always been measured on the revaluation model as per IAS 16 Property, Plant, and Equipment. The parking lot had a carrying value of R240 000 on 31 December 2020. During the year ended 31 December 2021, a flood resulted in the water table rising, making 50% of the parking lot waterlogged. This meant that only 50% of the parking lot could be used safely. UNIT 2 ASSIGNMENT - MARCH 2024 QUESTION PAPER QUESTION (Continued) (25 MARKS) (37.5 MINUTES WRITING TIME) An impairment test was performed on the parking lot on 31 December 2021 and the recoverable amount of the parking lot was found to be R130 000. During the year ended 31 December 2022, the water table had dropped such that the rest of the parking lot could again be used safely. On 31 December 2022, the recoverable amount of the parking lot was determined to be R210 000. Germiston site The Germiston dealership consists of a plot of land that Mint is developing for the purpose of building a second dealership. The land is correctly classified as property, plant, and equipment. The land was purchased at a cost of R120 000 on 1 January 2022. The land was revalued to its fair value of R145 000 on 31 December 2022. Additional information: Mint accounts for all its property plant and equipment on the cost model as per IAS 16 Property, Plant, and Equipment, except for its land which it accounts for on the revaluation model. Mint accounts for its investment property on the fair value model as per IAS 40 Investment Property. Ignore current tax and ignore deferred tax. Ignore VAT REQUIRED: a) Discuss whether Mint Condition Motors (Pty) Ltd should recognize the expenditure incurred on the installation of the turbo should as an asset (part of the truck body) on 31 December 2022. (4 marks) b) Prepare the journal entries required to account for the old truck trailer and the new truck trailer in the books of Mint Condition Motors (Pty) Ltd for the year ended 31 December 2022. (7 marks) Dates and narrations are required. c) Discuss whether the two floors Mint Condition Motors (Pty) Ltd owns in the Ontdekkers Road building should be classified as property, plant, and equipment, or as investment property as at 31 December 2022. (4 marks) d) Prepare the journal entries necessary to account for the parking lot in the books of Mint Condition motors (Pty) Ltd for the year ended 31 December 2022. (3 marks) Dates and narrations are not required. Closing entries are not required. e) Prepare the land column of the property, plant, and equipment reconciliation note of Mint Condition Motors (Pty) Ltd for the year ended 31 December 2022. (7 marks) Comparatives are not required. The total column is not required.