Homework $4$:

A Limited has been using the cost model to measure its plant. In $20$X$5$ A Limited changed its

accounting policy to use the revaluation model instead. The policy of A Limited is to revalue

its plant at $31$ December each year.

The plant was purchased for R$4500000$ on $1$ January $20$X$1$ and is depreciated at $10\%$ per

annum on the straight$-$line basis to a residual value of R$500000($all unchanged since

acquisition$).$

On $31$ December $20$X$5$ and the fair values $($based on an active market$)$ of the plant was

R$5000000.$

The revaluation is recorded using the net replacement value method. Transfers of the realised

portion of the revaluation surplus to retained earnings are to be made annually.

There was no other movement of plant during $20$X$5.$

The intention of A Limited is to sell the plant for R$5000000.$

There are no differences between taxable income and accounting profit, other than those

evident from the information provided.

Information relating to the local tax legislation: Corporate income tax is levied at $28\%$

$($unchanged for many years$),$ the inclusion rate for capital gains is $80\%$ and the tax authorities

allow a $15\%$ capital allowance $($wear and tear$)$ on the cost of plant.

REQUIRED

Complete the deferred tax tables at $31$ December $20$X$4$ and $20$X$5$ for the plant, the plant note

as at $31$ December $20$X$5$ and the journal entries relating to plant for the year ended $31$

December $20$X$5.$

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