Timber Kings Ltd $($Timber Kings$)$ is a company that manufactures and distributes high end custom$-$made timber furniture. Timber Kings is a registered VAT vendor and has a financial reporting date of $31$ December. The following details relates to assets owned by Timber Kings:

Plant

Timber Kings purchased a manufacturing plant on $1$ January $2023$ at a cost of N$$3,220,000$

$($VAT inclusive$).$ The manufacturing plant was tested at a cost of N$$120,000$ and the samples

manufactured during testing were sold for N$$80,000.$ The plant was available for use on $1$

March $2023.$Timber Kings is required to dismantle the plant and restore the site at the end of the plant$$s useful life. It is estimated that it will cost N$$750,000$ to restore and dismantle the machine at the end of year $15.$ Timber Kings spent N$$250,000$ on advertising the product to be manufactured by the plant. Due to initial operating inefficiencies, a total loss of N$$150,000$ was incurred in the first year of operation.

Land

Timber Kings owns land which was acquired on $2$ January $2019$ for N$$3220000.$Timber Kings also paid N$$490000$ transfer duty to to acquire the land. Additional N$$1265000($VAT inclusive$)$ was incurred to service the land before any construction could take place and was complete on $1$ April $2019.$

Office buildings

Various office buildings were erected on the acquired piece of land. The total costs incurred to erect the office buildings amounted to N$$13570000($VAT inclusive$).$ Construction of all the

office buildings were completed on $30$ June $2020.$ The office buildings were ready for use on this date. The staff moved into the office buildings during the first week of January $2021.$ The total useful life of the office buildings was initially estimated to be $20$ years with no residual value. The useful life and residual value estimate remained unchanged to date.

The office buildings were revalued for the first time to its fair value of N$$12000000$ on $31$ December $2022$ and subsequently to a fair value of N$$13150000$ on $31$ December $2023.$

Accounting policies and other information

$$ The plant and office buildings is accounted for using the revaluation model in terms of IAS $16$ Property, Plant and Equipment, and are revalued at the end of the financial year using the gross replacement value method.

$$ Land is accounted for under the cost model in terms of IAS $16$ Property, Plant and Equipment.

$$ Timber Kings use the straight$-$line method to depreciate all Property, Plant and Equipment.

$$ Any revaluation surplus is regarded to realise over the remaining useful life of the underlying asset as the asset is being used.

$$ Assume that all amounts exclude $15\%$ VAT except if stated otherwise.

$$ Assume that the normal credit terms are $30$ days for all years under consideration.

$$ Assume an after tax discount rate of $6\mathrm{.}8\%$ per annum $($compounded annually$)$ as appropriate for all years under consideration.

$$ Assume a normal tax rate of $32\%.$

REQUIRED:

$($a$)$ Calculate the initial cost of the manufacturing plant to be recognised in the financial statements of Timber Kings Ltd$.$

$($b$)$ Prepare an extract of the property, plant and equipment note to be disclosed in the financial statements of Timber Kings Ltd for the financial year ended

$31$ December $2023.$ Only include the following classes of assets as part of

the note:

$$ Land; and

$$ Office buildings.

Accounting policy notes, a total column and comparative figures are not

required. Additional descriptions as part of disclosure notes are not required.

Communication skills $$ presentation and layout

Total marks $20$