b and c please

Question 2 (35) Old Office Building Karas Investments owns a small office building in Windhoek, from which the company operates. The Windhoek office was purchased on 1 March 2019. Karas Investments decided to move its offices to Swakopmund on 1 November 2019. Karas Investments held the Windhoek office building for capital appreciation purposes from 1 November 2019. The following information with regards to the Windhoek office is available: Land Building R R Purchase price (1 March 2019) 500 000 900 000 Market value (28 February 2019) 530 000 1 200 000 Market value (1 November 2019) 525 000 1150 000 Market value (28 February 2020) 550 000 1160 000 Depreciation rate (straight-ine method) 2% Karas Investments has revalued its land and buildings on 28 February 2019 to ensure that the carrying amount does not differ materially from the amount that would be determined using the fair value at the reporting date. Karas Investments engages J&J surveyors, an accredited independent valuator, to determine the fair value of its land and buildings. The market values are determined with reference to prices in an active market. Depreciation for the year is based on the most recent valuations as at the end of that specific year. Accumulated depreciation at the date of revaluation are eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset. Revaluation surpluses will only be realized when the related assets are derecognized. Investment properties are accounted for by means of the fair value model. It is the policy of the company to disclose land and buildings as separate classes. Walvis Bay warehouse Page 10 of 26 Karas Investments owns a warehouse that is used as a workshop and also to store spare parts as well as idle machinery and vehicles. The piece of land on which the warehouse is situated is leased under an operating lease. The warehouse was obtained on 1 July 2020 at a cost of N$ 1 200 000. The warehouse is depreciated on a straight-ine basis over 15 years and is subsequently measured according to the revaluation model. The first revaluation of the warehouse to its fair value was performed on 30 June 2020. Karas Investments decided to rent their warehouse to a company in need of storage space at an annual rental of N$120 000 from 1 May 2021, since Karas Investments had to move all their operations to Swakopmund. The following fair values were determined by Karas Investments: Entity-specific measurement R 1 300 000 1 500 000 1 350 000 Market-based measurement R 1 400 000 1600 000 1400 000 30 June 2020 1 May 2021 30 June 2021 Windhoek Northern Industry office Karas Investments acquired the Rustenburg office on 1 July 2010 at a total cost of N$ 7 500 000(land N$1 500 000 and buildings N$6 000 000). The administration and finance departments of Karas Investments occupy this office building. The office building is depreciated on a straight-line basis over 20 years and the land and buildings are subsequently measured according to the revaluation model. The residual values were determined as immaterial. Karas Investments revalued their land and buildings to its market value for the first time on 30 June 2020. The board of directors decided to acquire an office building in the Swakopmund area and therefore decided on 31 December 2020 to dispose of the Windhoek Northern Industry office. On this date all the classification criteria per IFRS 5 Non-current assets held for sale and discontinued operations have been complied with. The following market values were determined by Karas Investments on 30 June 2020: Land N$1 700 000 Buildings N$6 500 000 Page 11 of 26 The fair values less costs to sell of the disposal group was as follows: 21 December 2020 30 June 2021 N$8 000 000 N$8 000 000 Accounting policies It is Karas Investments' accounting policy to realize revaluation surpluses as the assets are used except if transferred to investment property after which it will only be realized, when the investment property is sold. It is the policy of Karas Investments to eliminate the accumulated depreciation against the gross carrying amount of the asset on the date of revaluation. Revaluations are performed at the end of the financial year and depreciation for the current year is based on the most recent values determined with the revaluation at year end. Karas Investments uses the fair value model for investment property. Land and buildings are disclosed as two separate classes of assets. Required: a) Discuss the recognition criteria of IFRS 5 and explain whether the Windhoek Northern Industry office qualifies as a non-current asset held for sale. (10) b) Prepare the statement of financial position (10) c) Prepare the disclosure notes to the financial statements of the transactions above (15) Question 3 (30) TRIAL BALANCE FOR THE YEAR ENDED 30 June 2020 Note Dr R CrR 200 000 000 Revenue Cost of sales 150 000 000 Page 12 of 26 Question 2 (35) Old Office Building Karas Investments owns a small office building in Windhoek, from which the company operates. The Windhoek office was purchased on 1 March 2019. Karas Investments decided to move its offices to Swakopmund on 1 November 2019. Karas Investments held the Windhoek office building for capital appreciation purposes from 1 November 2019. The following information with regards to the Windhoek office is available: Land Building R R Purchase price (1 March 2019) 500 000 900 000 Market value (28 February 2019) 530 000 1 200 000 Market value (1 November 2019) 525 000 1150 000 Market value (28 February 2020) 550 000 1160 000 Depreciation rate (straight-ine method) 2% Karas Investments has revalued its land and buildings on 28 February 2019 to ensure that the carrying amount does not differ materially from the amount that would be determined using the fair value at the reporting date. Karas Investments engages J&J surveyors, an accredited independent valuator, to determine the fair value of its land and buildings. The market values are determined with reference to prices in an active market. Depreciation for the year is based on the most recent valuations as at the end of that specific year. Accumulated depreciation at the date of revaluation are eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset. Revaluation surpluses will only be realized when the related assets are derecognized. Investment properties are accounted for by means of the fair value model. It is the policy of the company to disclose land and buildings as separate classes. Walvis Bay warehouse Page 10 of 26 Karas Investments owns a warehouse that is used as a workshop and also to store spare parts as well as idle machinery and vehicles. The piece of land on which the warehouse is situated is leased under an operating lease. The warehouse was obtained on 1 July 2020 at a cost of N$ 1 200 000. The warehouse is depreciated on a straight-ine basis over 15 years and is subsequently measured according to the revaluation model. The first revaluation of the warehouse to its fair value was performed on 30 June 2020. Karas Investments decided to rent their warehouse to a company in need of storage space at an annual rental of N$120 000 from 1 May 2021, since Karas Investments had to move all their operations to Swakopmund. The following fair values were determined by Karas Investments: Entity-specific measurement R 1 300 000 1 500 000 1 350 000 Market-based measurement R 1 400 000 1600 000 1400 000 30 June 2020 1 May 2021 30 June 2021 Windhoek Northern Industry office Karas Investments acquired the Rustenburg office on 1 July 2010 at a total cost of N$ 7 500 000(land N$1 500 000 and buildings N$6 000 000). The administration and finance departments of Karas Investments occupy this office building. The office building is depreciated on a straight-line basis over 20 years and the land and buildings are subsequently measured according to the revaluation model. The residual values were determined as immaterial. Karas Investments revalued their land and buildings to its market value for the first time on 30 June 2020. The board of directors decided to acquire an office building in the Swakopmund area and therefore decided on 31 December 2020 to dispose of the Windhoek Northern Industry office. On this date all the classification criteria per IFRS 5 Non-current assets held for sale and discontinued operations have been complied with. The following market values were determined by Karas Investments on 30 June 2020: Land N$1 700 000 Buildings N$6 500 000 Page 11 of 26 The fair values less costs to sell of the disposal group was as follows: 21 December 2020 30 June 2021 N$8 000 000 N$8 000 000 Accounting policies It is Karas Investments' accounting policy to realize revaluation surpluses as the assets are used except if transferred to investment property after which it will only be realized, when the investment property is sold. It is the policy of Karas Investments to eliminate the accumulated depreciation against the gross carrying amount of the asset on the date of revaluation. Revaluations are performed at the end of the financial year and depreciation for the current year is based on the most recent values determined with the revaluation at year end. Karas Investments uses the fair value model for investment property. Land and buildings are disclosed as two separate classes of assets. Required: a) Discuss the recognition criteria of IFRS 5 and explain whether the Windhoek Northern Industry office qualifies as a non-current asset held for sale. (10) b) Prepare the statement of financial position (10) c) Prepare the disclosure notes to the financial statements of the transactions above (15) Question 3 (30) TRIAL BALANCE FOR THE YEAR ENDED 30 June 2020 Note Dr R CrR 200 000 000 Revenue Cost of sales 150 000 000 Page 12 of 26