TUTORIAL 20.5 – SUGGESTED SOLUTION
1. Journal entries for Land & buildings:
Dr
Accumulated depreciation
Cr
Building
Dr
Dr

86 250
86 250

Cr

Land
Building
Revaluation gain (OCI)

Cr

Depreciation expense – building
Accumulated depreciation

Cr

Revaluation Reserve
Retained earnings

Dr

Dr

750 000
1 211 250
1 961 250
120 000
120 000
80 750
80 750

Workings:
Land – cost
1 Jan 2006
Transfer duties
Cost
Acc depr (3 yrs)
(R1 575 000 – R1000 000)
= R575 000 / 20 x 3 )
CA at 31/12/2008
Revalued 1/1/09

1 000 000
50 000
1 050 000

Building – cost 1 500 000
75 000
1 575 000

Building –
Fair value

Reval gain

(86 250)
1 050 000

1 050 000

1 050 000
750 000
1 800 000

1 800 000

1 488 750

1 488 750
1 211 250
2 700 000

1 961 250
1 931 250

(39 250)

1 050 000
Depreciation
(R2 700 000 – 900 000) =
R1 800 000 / 15 yrs
CA at 31/12/2009

Land – Fair value 1 488 750

(120 000)

(80 750)

1 449 500

2 580 000

1 880 500
[16]

© Department of Accounting, UCT

TUTORIAL 20.5 – SUGGESTED SOLUTION continued
2.
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31 DECEMBER 2009
2009

2008

R

R

Sales

9 760 000

8 120 000

(3 163 000)

(3 144 800)

6 597 000

4 975 200

(3 018 000)

(2 251 750)

3 579 000

2 723 450

(1 027 120)

(780 566)

2 551 880

1 942 884

Revaluation gain

1 961 250

-

Total comprehensive income

4 513 130

1 942 884

Cost of sales
2009: (3 173 800 – 10 800)
2008: (3 120 000 + 24 800)
Gross profit
Operating expenses (1 223 000 + 1 795 000 (w4)7 marks)
Profit before tax
Tax expenses
2009: [(3 579 000 x 28%) + (250 000 x 10%) ]
2008: (787 510 – 6 944)
Profit for the year
Other comprehensive income

[20]

(w2) Damaged Equipment:
Date
1/7/07
Cost
31/12/08 Acc depr (1.5 yrs)
31/12/08 Carrying amount
30/09/09 Depreciation
Carrying amount
Impairment loss
31/12/09 Recoverable amount

R
2 800 000
(1 050 000) (2 800 000 / 4 x 1.5)
1 750 000
(525 000) (2 800 000 / 4 x 9/12)
1 225 000
(1 060 000)
165 000

Recoverable amount: Higher of:
Value in use: Zero
Selling price less costs to sell: R180 000 – 15 000 = R165 000
(w3) New equipment
Date
1/11/09
Cost
Depreciation
31/12/09 Carrying amount

R
3 240 000
(90 000) (3 240 000 / 6 x 2/12)
3 150 000
© Department of Accounting, UCT

TUTORIAL 20.5 – SUGGESTED SOLUTION continued
(w4) Total depreciation and impairment expense:
Depreciation building
(w1)
120 000
Depreciation old equipment
(w2)
525 000
Depreciation new equipment
(w3)
90 000
Impairment old equipment
(w2)
1 060 000
R1 795 000
3.
SALZBURG LIMITED
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 DECEMBER 2009
Stated
capital
R
Opening balances - as previously reported

8 500 000

- change in accounting policy

Retained earnings R
1 375 500

Revaluation reserve R
-

(4 320)
8 500 000

Balance at 1 January 2008 – restated

1 371 180

Total comprehensive income – restated (2008)

1 942 884

Dividends

-

(180 000)

Balance at 31 December 2008 – restated

8 500 000

Dividends
Balance at 31 December 2009

1 961 250

80 750

Transfer to retained earnings

-

2 551 880

Total comprehensive income (2009)

3 134 064

(80 750)

(250 000)
8 500 000

5 516 694

1 880 500
(14)

© Department of Accounting, UCT