FAC3702 EXAM PACK LATEST

FAC3702 EXAM PACK LATEST QUESTION 1 The following financial information relates to ABC Limited for the year ended 30 April 2014: 1. Machine Cost Residual value Revalued amount on a net replacement value basis Date R 1 May 1 May 2011 50 000 30 April Depreciation rate - 20% per annum straight-line The tax base on 1 May 2013 was R200 000 which would be deductible in equal amounts on 30 April 2014 and 30 April 2015 against taxable income. On 1 May 2013 there was a deferred tax liability of R36 000 due to the temporary difference in respect of the wear and tear on the machine. The estimates of the original useful life and residual value remained unchanged after the revaluation. During 2014 the board of directors decided to disclose the machine in future at the net replacement value. The revaluation on 30 April 2014 was performed by a sworn appraiser, W Mass, on the net replacement value basis with reference to prices of similar new assets in an active market. It is company policy that the revaluation surplus will be realised on disposal of the machine. 2. Investment property On 31 August 2013 ABC Limited sold its only investment property for R1 600 000. Since ABC Limited had already decided during the financial year ended 30 April 2013 to sell the investment property, the 2004 financial statements reflected a deferred tax balance that was correctly calculated and provided based on the intention to sell. Investment property was previously accounted for according to the fair value model. No tax allowances were granted on the property. Details of the disposed investment property are as follows: Land Land Building Building Date 1 November 2011 30 April 2013 1 November 2011 30 April 2013 Fair Cost value R R 250 000 - - 350 000 750 000 - - 1 100 000 Temporar y difference R -100 000 -350 000