ASSIGNMENT Stuffed With Love Lid (hereafter SWL) is a South African company that manufactures and sells stuffed toys. The company has a financial period ending 30 June The company had the following assets in their books as at 1 July 2019 which are carried using the cost model as prescribed by IAS16: Class Cost price Accumulated depreciation Notes Land and buildings 10 000 000 738 000 1 & 2 Machinery 7 800 000 3 510 000 3 Vehicles 6 240 000 2 750 000 4 Furniture and fittings 5 640 000 1 410 000 5 All of the above assets were bought on the same date (i.e. the day the company was incorporated) and since then to the beginning of the current financial period there have been no additions or disposals of any assets. NOTES: 1. Land consists of 25% of the cost price of land and buildings. Land is not depreciated as it is considered to have an unlimited useful life. 2. The building was acquired to house the company's administrative headquarters as well as the factory where the teddy bears are manufactured. On 1 March 2020, the company spent R1 500 000 on painting and landscaping in order to give the building a facelift. The facelift was much needed as the building was starting to look run-down and unkempt in comparison to some of the newer buildings being erected in the area On the date of acquisition, SWL estimated that the building would have a useful life of 25 years, after which it is expected to be worth R120 000. Buildings are depreciated over its estimated useful lives using the straight-line depreciation method. 3. On 30 September 2019 the company purchased a new machine. Details regarding the cost of the machine was as follows: R Purchase price 1 250 000 Transport costs 68 000 Installation costs 50 000 Direct costs of testing the machine to ensure that it is operating in the manner 80 000 intended by management. Proceeds from the sale of the goods produced in testing. 60 000 Training costs incurred in training production staff on the new machine. 12 500 According to the company's accounting policy, machinery are depreciated using the units of production method. The following information is available with regards to the estimates made by management: Old New Residual value 10% of cost price 10% of cost price Number of units the machine(s) are expected to produce 1 755 000 units 396 000 units over its useful life Actual number of units produced: Up to 30 June 2019 877 500 Between 1 July 2019 - 30 June 2020 390 000 79 200 2/3M PA 45 1 18% 0 17:49 03 1
