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QUESTION 2 ( 2 5 Marks ) Graham Hospitals Limited is a company that manufactures ventilators on specialised machinery and supply hospitals in Africa since
QUESTION Marks Graham Hospitals Limited is a company that manufactures ventilators on specialised machinery and supply hospitals in Africa since with ventilators which they use in their intensive care units. The companys financial year end is February. You are given the following Statement of Comprehensive Income for the year ended February The above statement of comprehensive income for the year ended February was prepared before adjusting for the effects as explained in additional information and Additional Information Equipment The following information on equipment is supplied to you and was correctly recorded in the financial years ending February and February Cost of equipment purchased on March Depreciation February Impairment loss February Depreciation February Actual carrying amount on February Historical carrying amount on February Adjustment at February On February the recoverable amount of the equipment has been estimated at R Management would like to take the recoverable amount for equipment into account and record the applicable adjustments. The auditor confirmed the following tax implications Any impairment loss on the equipment is tax deductible, and If there is reversal on the equipments impairment loss the reversal will be taxable. Machinery The following information on machinery is supplied to you. March Machinery purchased at R to manufacture ventilators. The total useful life of the machinery was estimated at years and the estimated residual value was R Machinery will be depreciated on a straight line basis. During the financial year Since the outbreak of coronavirus, there were an increase in demand for ventilators and ICUVentilator Limited has increased their production of ventilators. Consequently the company had to change the estimated useful life of their manufacturing machines as from march The total useful life of machinery was reestimated at years and the estimated residual life was changed to R The depreciation on machinery was correctly recorded and taken into account in the financial statements in accordance to original estimates. Management would like you to take the change in estimate into account and record the applicable adjustments. The company uses the reallocation method to account for changes in estimates. Income tax The corporate tax rate is Required Calculate the impairment loss reversal on equipment on February marks Supply the journal entry to record the impairment reversal on equipment at February marks Refer to additional information number to: Calculate the effect of the change in estimate on machinery using the reallocation method. Detailed workings are required to show the following: The carrying amount at February The machinerys depreciation before and after change in estimate for the financial year ended February The carrying amount at February The machinerys future depreciation before and after change in estimate at February marks Prepare the following notes to the financial statements of Graham Hospitals Limited for the year ended February in accordance to international financial reporting standards Profit before tax Change in accounting estimate Accounting policies are not required marks Prepare statement of comprehensive income of Graham Hospitals Limited for the year ended February in accordance to international financial reporting standards. Show workings. marks NB: Comparatives are required for part and
QUESTION Marks
Graham Hospitals Limited is a company that manufactures ventilators on specialised machinery and supply hospitals in
Africa since with ventilators which they use in their intensive care units. The companys financial year end is
February.
You are given the following Statement of Comprehensive Income for the year ended February
The above statement of comprehensive income for the year ended February was prepared before adjusting for the
effects as explained in additional information and
Additional Information
Equipment
The following information on equipment is supplied to you and was correctly recorded in the financial years ending
February and February
Cost of equipment purchased on March
Depreciation February
Impairment loss February
Depreciation February
Actual carrying amount on February
Historical carrying amount on February
Adjustment at February
On February the recoverable amount of the equipment has been estimated at R Management would
like to take the recoverable amount for equipment into account and record the applicable adjustments.
The auditor confirmed the following tax implications
Any impairment loss on the equipment is tax deductible, and
If there is reversal on the equipments impairment loss the reversal will be taxable.
Machinery
The following information on machinery is supplied to you.
March Machinery purchased at R to manufacture
ventilators.
The total useful life of the machinery was estimated at
years and the estimated residual value was R
Machinery will be depreciated on a straight line basis.
During the financial year Since the outbreak of coronavirus, there were an increase
in demand for ventilators and ICUVentilator Limited has
increased their production of ventilators. Consequently the
company had to change the estimated useful life of their
manufacturing machines as from march
The total useful life of machinery was reestimated at
years and the estimated residual life was changed to R
The depreciation on machinery was correctly
recorded and taken into account in the financial statements
in accordance to original estimates.
Management would like you to take the change in
estimate into account and record the applicable
adjustments. The company uses the reallocation method
to account for changes in estimates.
Income tax
The corporate tax rate is
Required
Calculate the impairment loss reversal on equipment on February marks
Supply the journal entry to record the impairment reversal on equipment at February marks
Refer to additional information number to: Calculate the effect of the change in estimate on machinery
using the reallocation method. Detailed workings are required to show the following:
The carrying amount at February
The machinerys depreciation before and after change in estimate for the financial year ended
February
The carrying amount at February
The machinerys future depreciation before and after change in estimate at February
marks
Prepare the following notes to the financial statements of Graham Hospitals Limited for the year ended
February in accordance to international financial reporting standards
Profit before tax
Change in accounting estimate Accounting policies are not required
marks
Prepare statement of comprehensive income of Graham Hospitals Limited for the year ended
February in accordance to international financial reporting standards. Show workings.
marks
NB: Comparatives are required for part and
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