Question
On 1 April 2018 the company installed an outside swimming pool, jacuzzi and whirlpool into their most luxurious health and fitness centre at a cost
On 1 April 2018 the company installed an outside swimming pool, jacuzzi and whirlpool into their most luxurious health and fitness centre at a cost of 500,000. They were granted planning permission on the basis that, at the end of the expected useful life of 20 years, they would be required to make good the site at an expected cost of 200,000. The companys cost of capital is 8% and the discount factor at the end of 20 years is 0.215 and 19 years is 0.232. No depreciation has yet been charged for the swimming pool.
Financial year 1/4-31/3
1. What is the present value of the amount required to make good the site?
2. What is the total amount of depreciation for the swimming pool as at 31st March 2019?
3. Due to the fact that the provision has been measured on a discounted basis unwinding of the discount needs to be accounted for by debiting finance costs and crediting the provision in the statement of financial position. What should the closing provision balance be at 31st March 2019?
4. Due to the provision being measured on a discounted basis, unwinding of the discount needs to be accounted for by debiting finance costs in the statement of comprehensive income and crediting the provision in the statement of financial position. What is the amount to be processed as a debit to finance costs and a credit to provisions for the unwinding of the provision?
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