FAC3761 ASSIGNMENT 2 2021

FAC 3761 Assignment 2
Solution
Unique number: 783718

Due date: 16 Aug 2021

, FAC3761 ASSIGNMENT 2 OF 2021
QUESTION 1
a) Cost of Makhado Building

R
Purchase cost 7 750 000
Modification costs 1 150 000
8 900 000

Cost of manufacturing equipment

R
Purchase cost (50 000 000 ∗ 0.022) 1 100 000
Delivery fee (100 000 ∗ 0.022) 2 200
Installation costs (800 000 ∗ 0.018) 14 400
Testing (200 000 − 50 000) (150 000)
966 600


b) To: Chief Financial Officer
From:
Date:
Subject:

Packaging equipment of the company was exchanged with cold storage delivery
vehicle;
The transaction was deemed to have commercial substance;
When the fair values of both the acquired asset and the asset given up can be
measured reliably, then the fair value of the asset given up is used to measure the
cost of the asset received unless the fair value of the asset received is more evident,
in which case it can be used; and
If the fair values of both assets could not be determined, the cost was going to be
the carrying amount of the asset given up.

Conclusion
Since the fair value of the packaging equipment given up is available, the cost of the
cold storage delivery vehicle is R3 000 000.