Surgimed Ghana Ltd. acquired a property for GH¢4 million with annual depreciation of GH¢300,000 on the straight line basis. At the end of the previous financial year at 31st December, 2019, when accumulated depreciation was GH¢1 million, a further amount relating to an impairment loss of $350,000 was recognised, which resulted in the property being valued at its estimated value in use. On 1st May, 2020, as a consequence of a proposed move to new premises due to the COVID 19 restrictions, the property was classified as held for sale. At the time of classification as held for sale, the fair value less costs to sell was GH¢2·4 million. On 1st July, 2020, the property market had improved and the fair value less costs to sell was reassessed at GH¢2·52 million and at the year-end on the 31st December, 2020, it had improved even further, so that the fair value less costs to sell was GH¢2·95 million. The property was sold on 5th January, 2021 for GH¢3 million. Required The directors of Surgimed Ghana Ltd. would like you to advice on the accounting treatment for the above transactions in the 2020 financial statements
Surgimed Ghana Ltd. acquired a property for GH¢4 million with annual depreciation of GH¢300,000 on the straight line basis. At the end of the previous financial year at 31st December, 2019, when accumulated depreciation was GH¢1 million, a further amount relating to an impairment loss of $350,000 was recognised, which resulted in the property being valued at its estimated value in use. On 1st May, 2020, as a consequence of a proposed move to new premises due to the COVID 19 restrictions, the property was classified as held for sale. At the time of classification as held for sale, the fair value less costs to sell was GH¢2·4 million. On 1st July, 2020, the property market had improved and the fair value less costs to sell was reassessed at GH¢2·52 million and at the year-end on the 31st December, 2020, it had improved even further, so that the fair value less costs to sell was GH¢2·95 million. The property was sold on 5th January, 2021 for GH¢3 million. Required The directors of Surgimed Ghana Ltd. would like you to advice on the accounting treatment for the above transactions in the 2020 financial statements
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Surgimed Ghana Ltd. acquired a property for GH¢4 million with annual depreciation of GH¢300,000
on the straight line basis. At the end of the previous financial year at 31st December, 2019, when
accumulated depreciation was GH¢1 million, a further amount relating to an impairment loss of
$350,000 was recognised, which resulted in the property being valued at its estimated value in use.
On 1st May, 2020, as a consequence of a proposed move to new premises due to the COVID 19
restrictions, the property was classified as held for sale. At the time of classification as held for sale,
the fair value less costs to sell was GH¢2·4 million. On 1st July, 2020, the property market had
improved and the fair value less costs to sell was reassessed at GH¢2·52 million and at the year-end
on the 31st December, 2020, it had improved even further, so that the fair value less costs to sell was
GH¢2·95 million. The property was sold on 5th January, 2021 for GH¢3 million.
Required
The directors of Surgimed Ghana Ltd. would like you to advice on the accounting treatment
for the above transactions in the 2020 financial statements
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