Question 3 (Investment Property) (20 Marks) Wellness Limited produces a thick, foul-smelling medicine that has been found to be excellent in warding off Hester in Wonderland Syndrome (HIWS), or micropsia, which is a disorienting neurological condition which affects human visual perception. Patients with this disease perceive humans, parts of humans, animals, and inanimate objects as substantially smaller than in reality. Wellness Limited's factory operated from a building that it owned, situated in Mandume Street in Windhoek. On 30 June 2015, however, the factory building was swallowed by a giant sinkhole caused by a tropical storm. This factory building had been purchased on 1 January 2015 for N$2 000 000 and was thought to have a total useful life of 20 years and a residual value of nil. Thankfully this happened at night while the building was empty. Wellness Limited was also fortunate in that it owned another property three roads away in Independence Avenue. This other property was, at the time, leased to Eduardo Ronaldo under an operating lease. Eduardo was generally late in paying his lease rentals, and this natural disaster gave Wellness Limited a perfect opportunity to evict him with immediate effect so that they could move their factory into the undamaged building: Was purchased on 1 January 2015 for N$300 000 Had a fair value of N$550 000 on 30 June 2015 and N$1 000 000 on 31 December 2015; Had a total estimated useful life of 6 years, estimated from the date of purchase; Had an estimated residual value of nil. Wellness Limited measures: Its property, plant and equipment using the cost model; and Its investment properties on the fair value model. YOU ARE REQUIRED TO: a) Journalise the above transactions in Wellness Limited's general journal for the year ended 30 June 2015. b) Define fair value and explain how it is calculated. (16 marks) (4 marks) END OF QUESTION PAPER Page 4 of 4