Zen Ltd. is a manufacturing company with a 30 June year-end.

On 1 July 2018, Zen Ltd. purchased plant at the cost of R1 200 000. Depreciation is calculated over 15 years by using the straight-line method with the plant having an insignificant residual value. Zen Ltd.'s policy is to revalue the plant annually on 30 June and carry the plant at net replacement cost. They further realise revaluation surpluses while the relevant assets are used. The plant had the following gross replacement cost:

• 30 June 2019 – R1 230 000

• 30 June 2020 – R1 275 000

Revaluations are done by an independent appraiser who determines the replacement cost with reference to observable prices in an active market. On revaluation, accumulated depreciation is set off against the gross carrying amounts. The residual value and useful life of the plant were reassessed on 30 June 2020, and no changes were noted.

The South African Revenue Service grants a wear and tear allowance of 10% on the plant. Zen Ltd. intends to recover the carrying amount of the machine through use. Assume a tax rate of 28%.

1: Calculate the depreciation for the year ended 30 June 2020 and the carrying amount of the plant on 1 July 2019 and on 30 June 2020. 

2: Calculate the current tax payable for 30 June 2020. Assume Zen Ltd. made a profit before tax of R250 000 for the year ended 30 June 2020. 

3: Calculate the deferred tax asset/liability of Zen Ltd. for the years ended 30 June 2019 and 30 June 2020. 

4: Prepare the journal entries to account for the revaluation of the plant on 30 June 2020. Include the necessary closing entries. Show all calculations. 

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