Question 1 20 marks (30 minutes) Background Information Ammon Computer Parts (Pty) Ltd (hereafter referred to as ACP") is a newly incorporated start-up company situated in the Westrand. ACP's business model entails the manufacturing and distributing of computer components. The company was founded by Mr. Ammon who had a passion for assembling computers and also identified a gap in the market for low-cost, locally-manufactured computer hardware. The company has a 31 December 2021 financial year-end. Motor Vehicle ACP does not operate any retail outlets. Instead, the company sells all their products online. Up until the beginning of the year, ACP has been using various third-party courier companies to ship their products to customers throughout South Africa, but Mr. Ammon believed this was not financially viable in the long-term. Consequently, on 1 April 2021, ACP purchased a second-hand delivery vehicle for R137 000 and employed a driver to make all the deliveries. Due to the vehicle being second-hand, ACP decided to send the delivery vehicle to a mechanic for an annual service on the same day. The cost of this service amounted to R2 500. Mr. Ammon indicated that his intention was to use the delivery vehicle for 5 years, after which he plans to sell the vehicle. He estimates that he will be able to sell the vehicle for R80 000 after the 5 years have passed. Due to the tough economic climate in South Africa since the outbreak of the Covid-19 virus, APC made virtually no sales during the first half of 2021. ACP's first sale for the year was on 15 July 2021. This was the first time that the company used the delivery vehicle it purchased. On 31 December 2021, the driver was involved in an accident with a drunken driver. The delivery vehicle sustained minor damages. At that date, the value in use of the delivery vehicle was estimated to be R125 000 whereas the fair value less costs to sell was R105 000. Inventory At the beginning of the financial year, ACP had R60 000 worth of inventory on hand. On inspection of the purchases ledger, it was determined that purchases for the year amounted to R712 500. Railage inwards costs amounted to R5 500. As part of the company's corporate social responsibility program, Donations of inventory worth R50 000 were made to local charity organisations throughout the financial year. During the 2021 financial year, ACP made total sales amounting to R943 250. The company applies a consistent 75% mark-up on cost. Due to heavy rainfall experienced at the end of December 2021, ACP's warehouse was flooded. After a thorough inspection, it was determined that certain inventory items were damaged. Having performed a stock-count at financial year-end, it was determined that the inventory on hand could be sold for R170 000 if R20 000 repair costs were to be incurred. 1 Additional information: . . Ignore VAT. ACP subsequently measures all Property, Plant and Equipment in accordance with the cost model. ACP applies the straight-line depreciation method. The company makes use of the periodic inventory system. Round all amounts to the nearest Rand where applicable. . . Marks (5) You are required to: (a) Discuss whether Ammon Computer Parts (Pty) Ltd can recognise the delivery vehicle as Property, Plant and Equipment in the statement of financial position as at 31 December 2021. (b) Calculate the impairment loss that needs to be recognised in the Statement of Profit or Loss for Ammon Computer Parts (Pty) Ltd for the financial year ended 2021 pertaining to the delivery vehicle. (b) Calculate the loss suffered by Ammon Computer Parts (Pty) Ltd during the 2021 financial year as a result of the damage to the inventory due to the flood. (5) (10) 2