Question
The following are an extract of the balances, which appeared in the preadjustment trial balance of EG Bowman Limited (‘EG Bowman’), a retail
business on 28 February 20.23:
Debit
Rand
Credit
Rand
Land
1 000 000
Buildings at cost
1 500 000
Accumulated depreciation on buildings:
28 February 20.22
210 000
Accumulated depreciation on buildings:
28 February 20.23
273 000
Vehicles at cost
600 000
Accumulated depreciation on vehicles:
28 February 20.22
225 000
Additional Information:
1. The buildings are occupied for the purposes of the activities of the entity
and are accounted for in terms of the cost model. At the date of acquisition,
1 September 20.18 the cost of the land was R1 000 000 (VAT excluded)
and the buildings, R1 725 000 (VAT included). .
A new store was erected during the year and completed on
1 December 20.22 at a total cost of R 345 000 (VAT included).
Administration costs in respect of the new store amounting to R20 000 (VAT
excluded) was paid cash and is not included in the amount of R345 000.
The erection of the new store has not been recorded by 28 February 20.23.
Depreciation on buildings has been recorded in the accounting records of
EG Bowman for the year ended 28 February 20.23. Land is not subject to
depreciation.
2. Depreciation on vehicles is written of over 4 years on the straight line
method with a residual value of 25% of the original cost.
A delivery vehicle, acquired on 1 July 20.20 at a total price of
R276 000 (VAT included) was involved in an accident on 31 August 20.22
and was scrapped. None of the above transactions including the entry for depreciation on
vehicles have been recorded.
3. EG Bowman is registered for Value Added Tax (VAT) and VAT is charged
at a rate of 15%
4. Ignore all other taxes.
QUESTION 1: REQUIRED
Marks
Present and disclose Property, Plant and Equipment in the notes to
the statement of financial position of EG Bowman as at
28 February 20.23. (The total column is not required.)
business on 28 February 20.23:
Debit
Rand
Credit
Rand
Land
1 000 000
Buildings at cost
1 500 000
Accumulated depreciation on buildings:
28 February 20.22
210 000
Accumulated depreciation on buildings:
28 February 20.23
273 000
Vehicles at cost
600 000
Accumulated depreciation on vehicles:
28 February 20.22
225 000
Additional Information:
1. The buildings are occupied for the purposes of the activities of the entity
and are accounted for in terms of the cost model. At the date of acquisition,
1 September 20.18 the cost of the land was R1 000 000 (VAT excluded)
and the buildings, R1 725 000 (VAT included). .
A new store was erected during the year and completed on
1 December 20.22 at a total cost of R 345 000 (VAT included).
Administration costs in respect of the new store amounting to R20 000 (VAT
excluded) was paid cash and is not included in the amount of R345 000.
The erection of the new store has not been recorded by 28 February 20.23.
Depreciation on buildings has been recorded in the accounting records of
EG Bowman for the year ended 28 February 20.23. Land is not subject to
depreciation.
2. Depreciation on vehicles is written of over 4 years on the straight line
method with a residual value of 25% of the original cost.
A delivery vehicle, acquired on 1 July 20.20 at a total price of
R276 000 (VAT included) was involved in an accident on 31 August 20.22
and was scrapped. None of the above transactions including the entry for depreciation on
vehicles have been recorded.
3. EG Bowman is registered for Value Added Tax (VAT) and VAT is charged
at a rate of 15%
4. Ignore all other taxes.
QUESTION 1: REQUIRED
Marks
Present and disclose Property, Plant and Equipment in the notes to
the statement of financial position of EG Bowman as at
28 February 20.23. (The total column is not required.)
Answers
GPT-4o mini
To present and disclose Property, Plant and Equipment in the notes to the statement of financial position of EG Bowman Limited as at 28 February 20.23, we must calculate the carrying amounts of each asset. Here is how to do it based on the provided information.
### EG Bowman Limited
**Notes to the Financial Statements**
**Property, Plant and Equipment as at 28 February 2023**
| Description | Cost | Accumulated Depreciation | Carrying Amount |
|---------------------------------------|-----------------------|---------------------------|------------------------|
| **Land** | R 1,000,000 | R 0 | R 1,000,000 |
| **Buildings** | | | |
| - Cost (incl. new store) | R 1,725,000 + R 345,000 | R 273,000 | R 1,797,000 |
| - Less Accumulated Depreciation | | R 273,000 | |
| | | | R 1,524,000 |
| **Vehicles** | | | |
| - Cost | R 600,000 + R 276,000 | | R 876,000 |
| - Less Accumulated Depreciation | R 225,000 + (R 276,000 - R 0) x (10/48) | | R 162,500 |
| | | | R 713,500 |
| **Total** | | | **R 2,760,500** |
### Notes:
1. **Land**: Carrying amount is R1,000,000 as it is not depreciated.
2. **Buildings**:
- The cost of the buildings includes the new store completed for R 345,000 (VAT included).
- To get the actual cost excluding VAT, calculate:
- R 345,000 ÷ 1.15 = R 300,000 (VAT excluded).
- Total cost of buildings = R 1,725,000 (initial buildings) + R 300,000 (new store) = R 2,025,000.
- Accumulated depreciation for buildings as at 28 February 2023 is R 273,000 (already provided).
- Carrying amount = R 2,025,000 - R 273,000 = R 1,752,000.
3. **Vehicles**:
- Total cost of vehicles = R 600,000 + R 276,000 = R 876,000.
- The vehicle scrapped on 31 August 2022 had a residual value of 25% of R 276,000 = R 69,000.
- Depreciation for the scrapped vehicle from 1 July 2020 to 31 August 2022 (26 months) = (R 276,000 - R 69,000) ÷ 48 months × 26 months = R 110,250.
- Total accumulated depreciation on vehicles = R 225,000 + R 110,250 = R 335,250.
- Carrying amount = R 876,000 - R 335,250 = R 540,750.
Finally, we present the totals:
| Description | Carrying Amount |
|---------------------------------------|------------------------|
| **Land** | R 1,000,000 |
| **Buildings** | R 1,752,000 |
| **Vehicles** | R 540,750 |
| **Total** | **R 3,292,750** |
*Note: Make sure to carefully calculate any adjustments for depreciation and any new costs. The VAT adjustments must also be confirmed to ensure they are accurately reflected in the cost of the various assets.*
This is a hypothetical example and should not override any specific accounting policies or choices made by EG Bowman Limited, as they may have additional considerations or adjustments based on their specific situation.
### EG Bowman Limited
**Notes to the Financial Statements**
**Property, Plant and Equipment as at 28 February 2023**
| Description | Cost | Accumulated Depreciation | Carrying Amount |
|---------------------------------------|-----------------------|---------------------------|------------------------|
| **Land** | R 1,000,000 | R 0 | R 1,000,000 |
| **Buildings** | | | |
| - Cost (incl. new store) | R 1,725,000 + R 345,000 | R 273,000 | R 1,797,000 |
| - Less Accumulated Depreciation | | R 273,000 | |
| | | | R 1,524,000 |
| **Vehicles** | | | |
| - Cost | R 600,000 + R 276,000 | | R 876,000 |
| - Less Accumulated Depreciation | R 225,000 + (R 276,000 - R 0) x (10/48) | | R 162,500 |
| | | | R 713,500 |
| **Total** | | | **R 2,760,500** |
### Notes:
1. **Land**: Carrying amount is R1,000,000 as it is not depreciated.
2. **Buildings**:
- The cost of the buildings includes the new store completed for R 345,000 (VAT included).
- To get the actual cost excluding VAT, calculate:
- R 345,000 ÷ 1.15 = R 300,000 (VAT excluded).
- Total cost of buildings = R 1,725,000 (initial buildings) + R 300,000 (new store) = R 2,025,000.
- Accumulated depreciation for buildings as at 28 February 2023 is R 273,000 (already provided).
- Carrying amount = R 2,025,000 - R 273,000 = R 1,752,000.
3. **Vehicles**:
- Total cost of vehicles = R 600,000 + R 276,000 = R 876,000.
- The vehicle scrapped on 31 August 2022 had a residual value of 25% of R 276,000 = R 69,000.
- Depreciation for the scrapped vehicle from 1 July 2020 to 31 August 2022 (26 months) = (R 276,000 - R 69,000) ÷ 48 months × 26 months = R 110,250.
- Total accumulated depreciation on vehicles = R 225,000 + R 110,250 = R 335,250.
- Carrying amount = R 876,000 - R 335,250 = R 540,750.
Finally, we present the totals:
| Description | Carrying Amount |
|---------------------------------------|------------------------|
| **Land** | R 1,000,000 |
| **Buildings** | R 1,752,000 |
| **Vehicles** | R 540,750 |
| **Total** | **R 3,292,750** |
*Note: Make sure to carefully calculate any adjustments for depreciation and any new costs. The VAT adjustments must also be confirmed to ensure they are accurately reflected in the cost of the various assets.*
This is a hypothetical example and should not override any specific accounting policies or choices made by EG Bowman Limited, as they may have additional considerations or adjustments based on their specific situation.