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.
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.
Chapter7: Deductions And Losses: Certain Business Expenses And Losses
Section: Chapter Questions
Problem 28CE
Related questions
Question
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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