QUESTION ONE (45 MARKS)

RocknRoll Limited purchased a Ship for R2 700 000 at nil residual value in 1 January 2017.

The ship is depreciated using the straight line method over 20 years.

RocknRoll Limited uses the cost model for its Property, Plant and Equipment. The business

purchased machinery at the cost of R480 000 in 31 March 2016. Machinery has 8 year useful

life at nil residual value. An indicator review showed that the recoverable amount is R300

000 during the current year. These are the only two asset owned by the company.

Financial year-end is 31 December 2018.

Required:

A. Prepare the Property, Plant and Equipment Note for RocknRoll Limited for the year

ended 31 December 2018. (Ignore Comparatives and Accounting Policies). (35)

B. Provide an Extract of the Statement of Financial Position for RocknRoll Limited for the

year ended 31 December 2018, showing how Property, Plant and Equipment would be

disclosed. (10)

(Show all your workings)

QUESTION TWO (45 MARKS)

SeaShore Limited is a platium mining company. As their accountant you are required to

account for deferred tax on each of the following items:

Expenses prepaid amounting to R11 000.

Rental income totalled R319 500 for the current financial year, monthly rental amount is

R21 300.

An amount of R40 700 was set a side as a provision for salaries and wages.

Mining equipment was bought by the company on 1 November 2018 for R144 840, the

equipment has a useful life of 8 years at nil residual value. The tax authorities allow a

wear and tear of 25% per annum.

The company also purchased vehicles on the 1 March 2019 for R566 300 at nil residual

value. The useful life is 10 years but tax authorities allow for a 20% per annum wear and

tear on vehicles.

An indicator review showed that at the recoverable amounts for equipment and vehicles

are R125 500 and R540 000 respectively at year end.

Tax authorities do not apportion wear and tear at any point during the year.

Financial year-end is 30 June 2019. Tax rate is 30% per annum.