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Mfolozi Limited ( hereafter referred to as Mfolozi ) is a company involved in environmental conservation. They are responsible for the cleaning of polluted rivers
Mfolozi Limited hereafter referred to as Mfolozi is a company involved in environmental conservation. They are responsible for the cleaning of polluted rivers and the ocean in the Eastern Cape area. As a result of the province taking an intensive approach to improving tourism, Mfolozi was contracted to undertake the cleaning of the rivers and the ocean around Port St Johns, one of the targeted tourist attraction areas on the Wild Coast, at the mouth of Mfolozi River. Mfolozi s year end is June and their financial statements will be authorised for issue on July for the financial year. The aftertax discount rate is per annum for all periods under review. The companys tax rate is During the year end audit, you have discovered the following matters which you raised as audit queries.QUERY : The Port St Johns project required Mfolozi to install specialised machinery in the areawhich will be dismantled at the end of the assets useful life. The installation costs ofRVAT inclusive were incurred and paid on July The future costs ofdismantling at the end of the assets useful life are estimated to be R Thespecialised machinery will be depreciated on the straightline basis over a period of six years to a nil residual value.Journal entry processed by the accountant, who is a CASA on July :Dr CrEnvironmental Cleaning Expense Provision for dismantling costs Bank Recognition of installation costs and future dismantling costs REQUIRED MARKS Based on the information above, prepare the relevant journal entries required to correct the records of Mfolozi Limited for the year ended June Ignore tax implication. Narrations are not required.
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