Richy Limited has plant that cost R345 000 on 01 January 2016. Installation and modification costs R69 000 (including vat). Transfer costs paid to lawyer amounted to R20 000. Transport costs for bringing the asset to location amounted to R20 000. The plant was ready for use on 01 January 2016. The machines were cleaned on 01 March 2016 at a cost of R10 000. Due to the low order levels in April 2016 the plant stood idle. Depreciation is provided over its useful life of 5 years using the straight-line method to a nil residual value. Richy Limited measures plant under the revaluation model. The plant was revalued as follows: 31 December 2016 R310 000 31 December 2017 R300 000 31 December 2018 R250 000 Richy Limited transfers the maximum amount from the realised portion of the revaluation surplus to equity. VAT must be calculated at 15%. Required: Disclose the above information in the notes to the financial statements for years ending 2016, 2017 and 2018. (Include in you answer the journal entries that must be recorded 5 in the general journal.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

QUESTION FOUR 

Richy Limited has plant that cost R345 000 on 01 January 2016. Installation and
modification costs R69 000 (including vat). Transfer costs paid to lawyer amounted to
R20 000. Transport costs for bringing the asset to location amounted to R20 000. The
plant was ready for use on 01 January 2016. The machines were cleaned on 01 March
2016 at a cost of R10 000. Due to the low order levels in April 2016 the plant stood idle.
Depreciation is provided over its useful life of 5 years using the straight-line method to a
nil residual value.

Richy Limited measures plant under the revaluation model. The plant was revalued as
follows:

31 December 2016 R310 000
31 December 2017 R300 000
31 December 2018 R250 000

Richy Limited transfers the maximum amount from the realised portion of the
revaluation surplus to equity. VAT must be calculated at 15%.
Required:
Disclose the above information in the notes to the financial statements for years ending
2016, 2017 and 2018. (Include in you answer the journal entries that must be recorded 5 in the general journal.)

Expert Solution
steps

Step by step

Solved in 3 steps with 4 images

Blurred answer
Knowledge Booster
Asset replacement decision
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education