QUESTION 1 (20 Marks)

Super Ltd acquired a plant for R1 000 000 on 1 January 2020. The plant has a useful life of 4 years and is assessed as having a zero residual value. Depreciation is provided on the straight-line method. Super Ltd has a legal obligation to dismantle the plant at the end of 4 years. The estimated future costs of dismantling the plant at 31 December 2023 are R40 000. The present value (at 1 January 2020) of the future dismantling costs is R27 321 (using a discount rate of 10%). The company uses the cost model to account for property, plant and equipment.

Required: Prepare the journal entries (ignoring the effects of taxation) relating to the above-mentioned information for 2020 and 2021 assuming that on 1 January 2021:

Dismantling costs are expected to increase to R60 000 (PV at 1 January 2021 = R45 079)