Chainsaw Ltd is one of the largest and fastest growing companies in the timber industry in the Limpopo province. It was incorporated in 2015 and has a 31 December financial year end. Chainsaw Ltd is a registered VAT vendor and so are all other entities trading with it. VAT is levied at 15%. The following is an extract from Chainsaw Ltd's asset register for the year ended 31 December 2019: Land and Buildings On 1 February 2018, Chainsaw Ltd bought a residential property from Mrs Sprucewood at a cost of R 3 800 000 (Excluding VAT). Transfer duty of R 200 000 (Excluding VAT) was paid on the same date. Of the total cost of the property, 75% was attributable to the buildings and the rest to the land. Chainsaw Ltd wanted to convert the property into an office building. The following expenses were incurred evenly to convert the property: • Painting • Plumbing • Room improvements • Transportation of materials used R2 300 Incl. VAT R1 150 Incl. VAT R5 750 Incl. VAT R 11 500 Incl. VAT On 30 June 2018, the conversion was completed and the property was ready for use as intended by Chainsaw Ltd's management. Depreciation policy: Land is not depreciated. Buildings are depreciated at 10% per annum and the estimated residual value is R 60 000. WITH REFERENCE TO NOTE ABOVE, Calculate the gross carrying amount of the building on 30 June 2018, as it would appear in the books of Chainsaw Ltd.
Chainsaw Ltd is one of the largest and fastest growing companies in the timber industry in the Limpopo province. It was incorporated in 2015 and has a 31 December financial year end. Chainsaw Ltd is a registered VAT vendor and so are all other entities trading with it. VAT is levied at 15%. The following is an extract from Chainsaw Ltd's asset register for the year ended 31 December 2019: Land and Buildings On 1 February 2018, Chainsaw Ltd bought a residential property from Mrs Sprucewood at a cost of R 3 800 000 (Excluding VAT). Transfer duty of R 200 000 (Excluding VAT) was paid on the same date. Of the total cost of the property, 75% was attributable to the buildings and the rest to the land. Chainsaw Ltd wanted to convert the property into an office building. The following expenses were incurred evenly to convert the property: • Painting • Plumbing • Room improvements • Transportation of materials used R2 300 Incl. VAT R1 150 Incl. VAT R5 750 Incl. VAT R 11 500 Incl. VAT On 30 June 2018, the conversion was completed and the property was ready for use as intended by Chainsaw Ltd's management. Depreciation policy: Land is not depreciated. Buildings are depreciated at 10% per annum and the estimated residual value is R 60 000. WITH REFERENCE TO NOTE ABOVE, Calculate the gross carrying amount of the building on 30 June 2018, as it would appear in the books of Chainsaw Ltd.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Chainsaw Ltd is one of the largest and fastest growing companies in the timber industry in the Limpopo
province. It was incorporated in 2015 and has a 31 December financial year end. Chainsaw Ltd is a
registered VAT vendor and so are all other entities trading with it. VAT is levied at 15%.
The following is an extract from Chainsaw Ltd's asset register for the year ended 31 December 2019:
Land and Buildings
On 1 February 2018, Chainsaw Ltd bought a residential property from Mrs Sprucewood at a cost of
R 3 800 000 (Excluding VAT). Transfer duty of R 200 000 (Excluding VAT) was paid on the same date.
Of the total cost of the property, 75% was attributable to the buildings and the rest to the land. Chainsaw
Ltd wanted to convert the property into an office building.
The following expenses were incurred evenly to convert the property:
• Painting
• Plumbing
• Room improvements
Transportation of materials used
R2 300
Incl. VAT
R1 150
Incl. VAT
R5 750
Incl. VAT
R 11 500
Incl. VAT
On 30 June 2018, the conversion was completed and the property was ready for use as intended by
Chainsaw Ltd's management.
Depreciation policy:
Land is not depreciated.
Buildings are depreciated at 10% per annum and the estimated residual value is R 60 000.
WITH REFERENCE TO NOTE ABOVE,
Calculate the gross carrying amount of the building on 30 June 2018, as it would
appear in the books of Chainsaw Ltd.
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