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