Iky's Prawns Ltd is a company that recently expanded and now delivers its prawns to coastal restaurants from its main shop in Durban. Three vans were acquired for purposes of facilitating this expansion. The following report has been compiled by the bookkeeper who is not quite sure how to deal with all the related transactions and events: Information pertaining to the initial costs in acquiring the three delivery vans: - Three vans were purchased on 1 July 208 in order to help reach the new delivery points. Total cost C600 000 (C200 000 per van). - Cost of transporting the vans from the manufacturer in Gauteng was C70 000 in total. - The once-off cost of galvanising the vans in Durban was C90 000. Galvanising provides protection against rust, (necessary since Durban is a coastal city). - The cost of repainting the vans in company colours to promote the new delivery business was C30000. Chapter 7 71 GAAP: Graded Questions Property, plant and equipment: cost model Information pertaining to the depreciation of the vans: - The company uses the cost model to measure its assets. - The vans have a useful life of 4 years. - All assets are depreciated on the straight-line basis unless another method is justifiable. - The residual value of each delivery van is currently estimated to be C45000, before considering related selling costs of C5000 per van. Information relating to a freak hailstorm at the end of the financial year: - A freak hailstorm hit the coast on 31 December 208 and, as the vans had been purchased so recently, no protective parking had yet been built for them. - The vans were exposed to the elements during the storm and were badly damaged, resulting in the fair value less cost of disposal dropping to C80000 (i.e. the market value of each van dropped to C100000, before taking into account the expected selling costs of C20000 per van). - Management has calculated the remaining value in use of each van to be C150000, (this has been calculated by adding the present value of the net cash flows from use of C120000 to the present value of the net proceeds from sale of C30000 ). Information relating to the trade-in of the old delivery vans and purchase of the nans: - On 3 January 209, the insurance company paid out C120 000 per van to settle the damages caused by the hailstorm. - After intensive board meetings and discussions amongst the management of Iky's Prawns, it was decided that the old, damaged vehicles would be traded-in on three new vans, and the insurance money would be used to pay the balance owed on this purchase. - The trade-in value for the three damaged vans combined was established to be C300000. - Three new delivery vans were purchased for C660000, and management decided to depreciate these over three years to a nil residual value. Required: a) With regards to the first set of delivery vans, calculate the total amount at which they should initially be measured, and their subsequent measurement up to 31 December 208