Reference no: EM132519348

On 01 January 2016, Polluter Limited opened a new plant in Pietermaritzburg.

The following costs were incurred during January 2016 in respect of the new plant(all excluding VAT):

Invoiced price of the plant                                                                     R6,000,000

Direct costs of testing the plant to ensure full operation as intended               R500,000

Proceeds from sale of samples                                                                  R600,000

Costs incurred in selling samples                                                                 R100,000

Plant opening function                                                                                R1000,000

Important:

The plant was in use from 01 January 2016. The plant incurred an operating loss of R200 000 for the month ended 31 March 2016 due to low order levels. The plant is depreciated using the staright line method at 10%.

The company uses the REVALUATION MODEL and Revalues its plant on an annual basis and records the Fair Value Adjustments. The following Revaluations were performed:

Fair Value 01/01/2017                  R5 490,000

Fair Value 01/01/2018                   R5 000,000

REQUIRED

Question 1 Calculate the Cost of the Plant as at 01 January 2016

Question 2 Prepare the Jouranl Enteries in the General Journal for the end of Years:

2.1 2016

2.2 2017

2.3 2018