QUESTION 1

Richy Limited has plant that cost R 345 000 on 01 January 2016. Installation and modification costs R 69 000 (including vat). Transfer costs paid to lawyer amounted to R 20 000. Transport costs for bringing the asset to location amounted to R 20 000. The plant was ready for use on 01 January 2016. The machines were cleaned on 01 March 2016 at a cost of R 10 000. Due to the low order levels in April 2016 the plant stood idle.

Depreciation is provided over its useful life of 5 years using the straight line method to a nil residual value.

Richy Limited measures plant under the revaluation model. The plant was revalued as follows:

31 December 2016: R 310 000

31 December 2017: R 300 000

31 December 2018: R 250 000

Richy Limited transfers the maximum amount from the realised portion of the revaluation surplus to equity. VAT must be calculated at 15%.

Required:

Disclose the above information in the notes to the financial statements for years ending 2016, 2017 and 2018. (Include in yourr answer the journal entries that must be recorded in the general journal.)

not These solutions because they are wrong and

1 Date Particulars Debit Credit 1/1/2016 Plant A/C R60.000 Input Vat R9.000 Plant A/C R20.000 Plant A C R20,000 gh To Payable Cr R19 000 (Being installation & modification cost, LawyeryCost and Transport cost capitalized, exclude Vat @ 15%) 10 Date Particulars Debit Credit 11 1/3/2016 Plant A C V R10,000 12 To Bank R10 900 13 (Being cleaning cost also capitalized, added into plant cost) 14 15 16 Date Particulars Debit Credit 17 31/12/2016 Depreciation A/c $90 666.66 18 To Accumulated Dep R90.666.66 19 (Being depreciation charged for year 2016) 20 21 Date Particulars Debit Credit 22 31/12/2016 Other Comprehensive Income R54,333.34 23 To Accumulated Depreciation R54.333.34 24 (Being revaluation of assets decreases the value 25 of plant, report to OCD)