QUESTION 1 MTK Ltd (MTK) is a growing chain of upmarket coffee shops based in Paris. The company is finalising its financial statements for the year ended 31 March 2021 and have approached you with the following issue. Delivery Vehicle MTK purchased a vehicle on 1 April 2017 for 450,000 cash. Management estimated that the vehicle had a useful life of 10 years from the date of purchase. A similar vehicle has an estimated economic life of 12 years. Management accounts for depreciation on a straight-line basis. The vehicle is expected to realise 15,000 when it is sold for scrap at the end of its useful life. At the purchase date, a 10-year-old vehicle could be sold for 10,000. In 2019 MTK had to spend 7,100 on repairs and maintenance of the vehicle to ensure it continued operating effectively. On 31 March 2020, management determined that the vehicle should be revalued at this date using the net replacement method. The fair value of the vehicle is 360,000. The remaining useful lives and residual values remained unchanged. On 31 March 2021, management noticed that the delivery vehicle had been slightly scratched and damaged. The vehicles value in use was 285,000 and a fair value less cost to sell of 290,000. Required: (a) Prepare all the journal entries required to account for the delivery vehicle from the date of purchase up to 31 March 2021. Note: you are required to show all workings, provide narrations for your journal entries, ignore current and deferred tax, and note that revaluation surplus is transferred to retained earnings on disposal of the asset. (20 marks) (b) Discuss the current and deferred tax implications of the impairment loss for the year ended 31 March 2021 assuming that the tax authority will allow 60% of the impairment as a deduction as the asset is utilised and 30% of the impairment on disposal. Note: The applicable tax rate is 35%. Prior period assessments are not reopened. (15 marks) (Total: 35 marks)