Question 4

Samdisk Ltd owns a property which was purchased on 1 January 2015 for $5,000,000, of which $1,000,000 was considered

to relate to the land on which the building is situated. The company has followed a policy of depreciating the buildings at the

rate of 5 percent on cost per annum. On 31 December 2017, the property was valued by a firm of chartered surveyors at

$4,000,000 of which $1,200,000 was considered attributable to the value of the land. The valuers further estimated that the

property possessed a remaining useful life of 30 years from 1 January 2018.

Required:

a Prepare journal entries with narratives for recording the relevant transactions for the year ended 31 December 2017 for this property. (12 marks)

b Prepare journal entries with narratives for recording the depreciation charges for this property. (4 marks)

c Show the details relating to the property which would appear in the statement of financial position and statement of profit or loss on 31 December 2017 and 31 December 2018.

(9 marks)