Question
QUESTION 4 (30 MARKS) (45 MINUTES) The following information relating to CeramicCar Ltd was extracted from the financial records for the reporting period ended 31
QUESTION 4 (30 MARKS) (45 MINUTES) The following information relating to CeramicCar Ltd was extracted from the financial records for the reporting period ended 31 March 2021: DELIVERY VAN CeramicCar Limited purchased a delivery vehicle on 1 June 2018 for R1 380 000 (including 15% VAT) for the purpose of delivering clothing to customers nationwide. The delivery vehicle has a residual value of R13 000. At acquisition the following significant components (amounts excluding VAT) were determined: The gearbox was valued at R72 000 with an estimated useful life of 10 years and a residual value of zero. The engine was valued at R90 000 with an estimated useful life of 15 years and a residual value of zero. The delivery vehicle would require inspections every 2 years at an estimated cost of R125 000 per inspection. The cost of the first inspection is included in the purchase price of delivery vehicle above as a significant component of the vehicle. On 1 June 2020 the cost of inspection for the delivery vehicle was R160 000. The remainder of the delivery vehicle has a useful life of 4 years. MANUFACTURING PLANT Due to the increase in demand for the CeramicCar products, it was decided to construct an additional manufacturing plant. In order to finance the plant. A loan of R2 000 000 with BNF Bank was taken out on 1 June 2018. Had it not been for the construction of the plant the loan would not have been obtained. Construction activities began on the 1 August 2018. The construction of the plant was completed on 1 January 2021. The plant was available for use on 1 March 2021. The following expenditure relates to the manufacturing plant: R Purchase price as per invoice (including VAT at 15%) 1 725 000 Legal cost to draft the agreement to purchase the machine (Excl VAT) 42 000 Expenditure incurred on the manufacturing plant (Excl VAT) 53 000 AO1(2022): ACCOUNTANCY IIA _________________________________________________________________________________ _________________________________________________________________________________ Page 6 of 6 QUESTION 4 (CONTINUED) Finance costs on the loan for the following periods are as follows: R 1 June 2018 - 1 January 2021 113 475 1 August 2018 - 1 January 2021 115 000 1 August 2018 - 1 March 2021 118 500 Depreciation for the manufacturing plant is calculated using the straight line method over a period of 20 years. The residual value of the plant amounts to R150 000. ADDITIONAL INFORMATION: 1) The components of the machine can function independently, but are used as a unit. Components are independently replaced at the end of their useful lives. Parts cannot be realized independently at the end of their useful life. 2) Unless stated otherwise all amounts exclude VAT. 3) Amounts should be rounded to the nearest Rand. REQUIRED: Disclose the following note in the financial statements of CeramicCar Ltd for the reporting period ended 31 March 2021: Property, Plant and Equipment (30) NOTE: - Show all your calculations as marks may be awarded - Comparative amounts are not required. - The total column of the property, plant and equipment table is not required. - The accounting policy note is not required
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