FAC1601/QUESTION BANK QUESTION 6.3 (20 marks) (24 minutes) Fairview Ltd is an investment company and its year-end is 30 June. The following details are available relating to its investment property: 1. Land situated at stand 554 , Parkhurst, with an original cost of R700 000 , was originally purchased on 1 April 2014 for the purpose of long term capital appreciation. On 1 April 2015, a property developer approached Fairview Ltd to buy the land. The developer offered Fairview Ltd R980 000 for the piece of land. The fair value of this land on 30 June 2014 was R800 000. Fairview Ltd has decided to accept the offer and the transfer of the property to the property developer took place on 30 June 2015. 2. Fairview Ltd owns property situated at stand 98, Benoni, which was purchased on 1 July 2014 for R2 500000 . The value of the land at that date was R600 000 and the office building R1 900000 . This property has been rented out since the date of acquisition under a three year operating lease agreement. There are two tenants occupying the building and the monthly rental receivable from them is R20 000 and R36 000 respectively. Fairview Ltd repainted the building during the current year as part of its general maintenance programme for the building, at a cost of R95000. At year-end the fair value of this property was R2 700000 (land R650 000 and building R2 050 000). 3. On 1 January 2014, Fairview Ltd acquired property situated at stand 55 , Springs, for R500 000. The property was acquired to serve as an investment property in future. On 1 February 2014 the construction of an office block on the land commenced. At 30 June 2014, the construction costs to date amounted to R1 550000 . The construction of the office building was completed on 30 October 2014 and the total cost of constructing this building amounted to R1 950000 . Fairview Ltd was only able to secure one tenant for the new building by 31 May 2015. Additional capital expenditure of R105 000 was incurred during April 2015 in order to secure this tenant. The office building is leased out in terms of an operating lease agreement since 1 June 2015 , for the next five years and monthly rental receivable is R45 000 . On 30 June 2015 , the fair value of the building was determined at R2 100000 and that of the land at R580 000 . 4. Fairview Ltd applies the revaluation model to its investment property and the cost model to its property, plant and equipment. 5. All valuations were performed by J Spark of Price-a-Prop, a firm of independent sworn appraisers. Mr Spark holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. The fair values were determined by reference to current market evidence. The most recent valuations were performed at year-end. 6. Profit before tax for the year ended 30 June 2015 , after taking into account the effect of all of the above information, amounted to R700 000. REQUIRED: Disclose the above-mentioned information in the applicable notes of Fairview Ltd on 30 June 2015. Your answer must comply with the requirements of International Financial Reporting Standards (IFRS). Comparative figures are not required. FAC1601/QUESTION BANK QUESTION 6.3 (20 marks) (24 minutes) Fairview Ltd is an investment company and its year-end is 30 June. The following details are available relating to its investment property: 1. Land situated at stand 554 , Parkhurst, with an original cost of R700 000 , was originally purchased on 1 April 2014 for the purpose of long term capital appreciation. On 1 April 2015, a property developer approached Fairview Ltd to buy the land. The developer offered Fairview Ltd R980 000 for the piece of land. The fair value of this land on 30 June 2014 was R800 000. Fairview Ltd has decided to accept the offer and the transfer of the property to the property developer took place on 30 June 2015. 2. Fairview Ltd owns property situated at stand 98, Benoni, which was purchased on 1 July 2014 for R2 500000 . The value of the land at that date was R600 000 and the office building R1 900000 . This property has been rented out since the date of acquisition under a three year operating lease agreement. There are two tenants occupying the building and the monthly rental receivable from them is R20 000 and R36 000 respectively. Fairview Ltd repainted the building during the current year as part of its general maintenance programme for the building, at a cost of R95000. At year-end the fair value of this property was R2 700000 (land R650 000 and building R2 050 000). 3. On 1 January 2014, Fairview Ltd acquired property situated at stand 55 , Springs, for R500 000. The property was acquired to serve as an investment property in future. On 1 February 2014 the construction of an office block on the land commenced. At 30 June 2014, the construction costs to date amounted to R1 550000 . The construction of the office building was completed on 30 October 2014 and the total cost of constructing this building amounted to R1 950000 . Fairview Ltd was only able to secure one tenant for the new building by 31 May 2015. Additional capital expenditure of R105 000 was incurred during April 2015 in order to secure this tenant. The office building is leased out in terms of an operating lease agreement since 1 June 2015 , for the next five years and monthly rental receivable is R45 000 . On 30 June 2015 , the fair value of the building was determined at R2 100000 and that of the land at R580 000 . 4. Fairview Ltd applies the revaluation model to its investment property and the cost model to its property, plant and equipment. 5. All valuations were performed by J Spark of Price-a-Prop, a firm of independent sworn appraisers. Mr Spark holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. The fair values were determined by reference to current market evidence. The most recent valuations were performed at year-end. 6. Profit before tax for the year ended 30 June 2015 , after taking into account the effect of all of the above information, amounted to R700 000. REQUIRED: Disclose the above-mentioned information in the applicable notes of Fairview Ltd on 30 June 2015. Your answer must comply with the requirements of International Financial Reporting Standards (IFRS). Comparative figures are not required