Machine

On $1$ July $2022$ Kipkor Ltd purchased a machine for an amount of R$500000.$ Included in the purchase consideration is an amount of R$60000$ relating to inspection costs. The machine was available for use, as intended by management, on acquisition date. The machine must be inspected every $3$ years to comply with safety regulations. Due to unforeseen circumstances, Kipkor Ltd had to inspect the machine on $31$ December $2023$ and incurred inspection costs amounting to R$75000.$

A residual value of Rnil was allocated to the machine and it is estimated that the machine will produce $600000$ units during its useful life. For the $2022$ and $2023$ financial years the machine produced $15000$ units and $45000$ units respectively.

Delivery vehicle

On $1$ April $2023$ KipKor Ltd purchased a second$-$hand delivery vehicle for an invoice amount of R$150000.$ A special arrangement was made with the seller to defer payment until $1$ April $2024.$ On acquisition date the vehicle was available for use, as intended by management. On acquisition date it was estimated that the vehicle had an expected useful life of $5$ years and a residual value of Rnil was allocated to the vehicle.

Administration building

KipKor Ltd owns an administration building that was initially held as an investment property on acquisition. The property was purchased on $1$ January $2019$ at a cost of R$2400000($Land: R$700000$; Building: R$1700000).$

During the $2022$ financial year KipKor Ltd decided to rather occupy the administration building themselves instead of renting it out and subsequently took occupation of the administration building on $30$ April $2022.$ On $30$ April $2022$ it was estimated that the building had a remaining useful life of $30$ years and a residual value of $R500000$ was allocated to the building.

The fair values and net replacement values of the administration property on the respective dates were as follows:

$\backslash$table$[[,$Land,Building,Total$],[30$ April $2022,900000,2300000,3200000],[31$ December $2023,750000,2150000,2900000]]$

$2$

FAC$3702/2024/$S$1$

Additional information

Owner$-$occupied land is accounted for according to the revaluation model. Any revaluation surplus is realised on sale of the underlying asset.

Owner$-$occupied buildings, machinery and vehicles are accounted for according to the cost model

Investment property is accounted for according to the fair value model. The carrying amount of investment property will be recovered through sale of the property.

Depreciation on buildings and vehicles are provided according to the stre line method and depreciation on machinery is provided according to the of production method. Depreciation will be provided on the most revalued amounts.

All the net replacement values, and fair values were determined by$,$ independent sworn appraiser. These values were determined with reference to current market prices, on an arm's length basis, of similar properties in the same area.

The South African normal tax rate is $27\%.80\%$ of capital gains are taxable.

The South African Revenue Service allows the following capital allowances:

No tax allowance on administration buildings.

A tax allowance on machinery according to the straight$-$line method over $5$ ye $2$ of $5$ oportioned for part of the year.

A tax allowance of the deivery vehicle according to the straightline method over $4$ years, not proportioned for part of the year.

Deferred tax is provided for on all temporary differences using the statement of financial position approach. There are no other temporary differences except those mentioned in the question. The company will have sufficient taxable profit in future against which any unused tax losses can be utilized Assume that the inspection costs are significant and regarded as a separate

component of the machine. Major inspection costs are written off for taxation

purposes when the costs are actually incurred.

$$ The applicable post$-$tax discount rate is $8\mathrm{.}76\%.$

$$ Assume that land and buildings are regarded as separate asset classes and

that all amounts are material Prepare the property, plant and equipment note to the annual

financial statements of KipKor Ltd for the year ended $31$ December

$2023$

$26$

$($b$)$ Calculate the deferred tax balance in the statement of financial

position of KipKor Ltd on $31$ December $2023,$ relating to the

property, plant and equipment, using only the statement of financial

position approach.

$10$

$($c$)$ Prepare all the necessary journal entries to account for the

following property, plant and equipment in the records of KipKor

Limited for the years ended $31$ December $2022$ and $31$ December

$2023$:

i$.$ Delivery vehicles

ii$.$ Administrative building

$$ Entries relating to depreciation are not required

$$ Dates are required

$$ Show in which statement the journal will be processed e$.$g$.,$

P$/$L$,$ OCI, SCE, SFP

$$ Ignore narrations

$$ Ignore tax