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Cocacola Ltd ( hereafter Cocacola ) is a soft - drink manufacturer located in Johannesburg. The company produces, bottles and dispatches carbonated beverages from its
Cocacola Ltd hereafter Cocacola is a softdrink manufacturer located in Johannesburg. The company produces, bottles and dispatches carbonated beverages from its factory in Newtown. A manufacturing property consisting of land and buildings was originally acquired for R which houses the bottling plant and production facilities. PPE IAS At the time of the acquisition of the purchase price was attributed to land and of the purchase price was attributable to the factory building. The South African Revenue Service SARS accepted the allocation of the purchase price between land and buildings. It has always been the intention of the company to make use of the manufacturing property when producing carbonated beverages. Although Cocacola has only been producing soft drinks from the Newtown facility for a relatively short period, sales of the popular soft drink have sky rocketed, prompting the company to look for larger production premises in order that they may increase the production of Cocacola beverages. To this end the company purchased a new manufacturing property in Pretoria on January for R When allocating the purchase price, it was deemed that of the purchase price was attributable to land whilst was attributable to the building. The existing bottling plant was expanded and moved to the Pretoria premises during March Production from the Pretoria bottling plant began on April Rather than sell the Newtown property, Cocacola decided to retain it and lease the property IAS to another manufacturing company in terms of an operating lease effective from April The details of the Newtown Property are as follows: Accumulated buildings Depreciation January Fair Value April x millland; x mill building Land Buildings Fair Value December Land Buildings Owneroccupied property is accounted for using the cost model whilst investment property is accounted for using the fair value model. Owneroccupied buildings are depreciated on a straightline basis over years to a zero residual value. Land is not depreciated. SARS allows Cocacola an annual building allowance of on the cost not apportioned in the computation of Income tax. The normal taxation rate is and the inclusion rate for Capital Gains Tax purposes is Cocacola has a December year end and reports in terms of International Financial Reporting Standards. Required List FIVE main items which do not qualify as investment properties Prepare the journal entries that Cocacola Ltd will record in respect of the abovementioned information as it pertains to the Newtown property for the financial year ended December Journal entries in respect of the deferred taxation consequences of the abovementioned transactions are not required. Explain, with reference to the appropriate paragraphs in IAS : Income Taxes, what the deferred taxation consequences will be for Cocacola Ltd with regard to the Newtown property being reclassified from Property, Plant and Equipment to Investment Property on April Your answer should set out the consequences for land and buildings separately. Where possible refer to the actual amounts involved as marks are awarded for theseThe details of the Newtown Property are as follows:
Cocacola Ltd hereafter Cocacola is a softdrink manufacturer located in Johannesburg.
The company produces, bottles and dispatches carbonated beverages from its factory in Newtown.
A manufacturing property consisting of land and buildings was originally acquired for
R which houses the bottling plant and production facilities. PPE IAS
At the time of the acquisition of the purchase price was attributed to land and of the purchase price was attributable to the factory building.
The South African Revenue Service SARS accepted the allocation of the purchase price between land and buildings.
It has always been the intention of the company to make use of the manufacturing property when producing carbonated beverages.
Although Cocacola has only been producing soft drinks from the Newtown facility for a relatively short period, sales of the popular soft drink have sky rocketed, prompting the company to look for larger production premises in order that they may increase the production of Cocacola beverages.
To this end the company purchased a new manufacturing property in Pretoria on January for R
When allocating the purchase price, it was deemed that of the purchase price was attributable to land whilst was attributable to the building.
The existing bottling plant was expanded and moved to the Pretoria premises during March Production from the Pretoria bottling plant began on April
Rather than sell the Newtown property, Cocacola decided to retain it and lease the property IAS to another manufacturing company in terms of an operating lease effective from April
The details of the Newtown Property are as follows:
Accumulated buildings Depreciation January
Fair Value April x millland; x mill building
Land
Buildings
Fair Value December
Land
Buildings
Owneroccupied property is accounted for using the cost model whilst investment property is accounted for using the fair value model.
Owneroccupied buildings are depreciated on a straightline basis over years to a zero residual value.
Land is not depreciated.
SARS allows Cocacola an annual building allowance of on the cost not apportioned in the computation of Income tax.
The normal taxation rate is and the inclusion rate for Capital Gains Tax purposes is
Cocacola has a December year end and reports in terms of International Financial Reporting Standards.
Required
List FIVE main items which do not qualify as investment properties
Prepare the journal entries that Cocacola Ltd will record in respect of the abovementioned information as it pertains to the Newtown property for the financial year ended December Journal entries in respect of the deferred taxation consequences of the abovementioned transactions are not required.
Explain, with reference to the appropriate paragraphs in IAS : Income Taxes, what the deferred taxation consequences will be for Cocacola Ltd with regard to the Newtown property being reclassified from Property, Plant and Equipment to Investment Property on April Your answer should set out the consequences for land and buildings separately. Where possible refer to the actual amounts involved as marks are awarded for theseThe details of the Newtown Property are as follows:
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