Colbeck Castle Limited $($CCL$)$ is a distributor of household products, located in Colbeck Hills,

Portland. The company has three divisions, Kitchen, Bathroom and the Luxury division. The

company was incorporated on the $1$st of January $2019$ with a share capital of $12,000,000$ ordinary

shares of $$4.$ On the date of the incorporation the company acquired two $(2)$ delivery trucks at a

cost of $$12,000,000$ each and decided to depreciate the trucks using the units of output method.

The company planned to keep the trucks for a useful life of $300,000$ miles each. The residual value

of each truck is estimated to be $$1,000,000.$ Calculate the deferred taxation on truck $1$ for the year ended $31$ December $2019$ if the

inland revenue department for the purpose of capital allowance allowed for the truck to be

written off over four years on the straight$-$line basis with nil residual value. The rate of

taxation is $30\%.$ On January $1,2020$ CCL issued $8\%$ convertible bonds at their nominal value of $$27,000,000.$ The

bonds are convertible at any time up to maturity into $50$ ordinary shares for each $$600$ of bond.

Alternatively, the bonds will be redeemed at par after $4$ years. Similar non$-$convertible bonds carry

an interest rate of $10\%.$ On January $12021,$ the company issued $2,000,000$ ordinary shares at a

price of $$5\mathrm{.}50$ which was fully subscribed. This was followed by a bonus issue of $1$ share for $5$

held on that date, funding came from the share premium account which at that date had a balance

of $$1,700,000$ and retained earnings a balance of $$2,520,000.$

Management of the company decided on the $30$ November $2022$ to close down the Luxury division

because it was deemed to be under performing. Management held a meeting with the employees

of this division in March $2023$ and informed of its impending actions. The employees were

informed that a buyer has been located and the sale would be completed by May $2023.$ The division

was sold on $15$ May $2023$ for $$150,000,000.$

On June $30,2022$ one of the delivery trucks is involved in an accident and is sold for $$700,000.$

CCL replaces this truck with a new truck at a cost of $$11,000,000.$ The residual value of this truck

will $$1,200,000$ after it is used for $300,000$ miles.

$($a$)$ Prepare the relevant journal entries for the first two $(2)$ years on the lease acquired by

the company on $1$ January, $2023.(9$marks$)$

$($b$).$ Prepare the relevant financial statement extracts in the third year of the lease $(6$ marks$)$