QUESTION ONE [30] Topfront Limited owns two buildings: - A Head office building located in Cape Town - Another building located in Stellenbosch The office building located in Cape Town is used as Topfront’s head office. The floods experienced in the Western Cape unfortunately destroyed the head office building on the 30th June 2022. The building was recently purchased on the 1st January 2022 for R10 200 000. The building has a total useful life of 10 years and a nil residual value. The property in Stellenbosch is leased out to the University. However, it was the university vacation period therefore this building is unoccupied. Topfront, decided to give the university notice of termination of their lease agreement, as they needed to move their head office to this building and the university was not occupying the premises currently and they would have ample time and opportunity to find another premises before the university re-opens. The termination of the lease and the re-location of Topfront was effective immediately from the 30th June 2022. Additional Information regarding the property in Stellenbosch: - Purchased on the 1st January 2022 for R15 000 000 - On the 30th June 2022, it had a fair value of R21 000 000 - There was no change in fair value at 31 December 2022 - The total estimated useful life was 10 years from date of purchase with a nil residual value. Topfront uses the cost model to measure its Property, Plant & Equipment and the fair value model, to measure its Investment properties. REQUIRED: Prepare the journal entries in Topfront Limited’s books, taking into account, the above transactions for the year ended 31 st December 2022. Ignore tax.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION ONE [30] Topfront Limited owns two buildings: - A Head office building located in Cape Town - Another building located in Stellenbosch The office building located in Cape Town is used as Topfront’s head office. The floods experienced in the Western Cape unfortunately destroyed the head office building on the 30th June 2022. The building was recently purchased on the 1st January 2022 for R10 200 000. The building has a total useful life of 10 years and a nil residual value. The property in Stellenbosch is leased out to the University. However, it was the university vacation period therefore this building is unoccupied. Topfront, decided to give the university notice of termination of their lease agreement, as they needed to move their head office to this building and the university was not occupying the premises currently and they would have ample time and opportunity to find another premises before the university re-opens. The termination of the lease and the re-location of Topfront was effective immediately from the 30th June 2022. Additional Information regarding the property in Stellenbosch: - Purchased on the 1st January 2022 for R15 000 000 - On the 30th June 2022, it had a fair value of R21 000 000 - There was no change in fair value at 31 December 2022 - The total estimated useful life was 10 years from date of purchase with a nil residual value. Topfront uses the cost model to measure its Property, Plant & Equipment and the fair value model, to measure its Investment properties. REQUIRED: Prepare the journal entries in Topfront Limited’s books, taking into account, the above transactions for the year ended 31 st December 2022. Ignore tax.

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