Greenhouse Limited is a small company listed on the Alt X Exchange. It manufactures specialist components for satellite navigation to monitor carbon emissions in the atmosphere.
The year-end of the company is 30 June.
The company purchased an item of plant on 1 July 20X5. It was installed and available for use in the manner intended by management on the same day. The cost of the plant was C 900 000. It has an estimated useful life of four years and no residual value. The tax authorities allow a tax allowance of 25% per annum.
Greenhouse Limited uses the revaluation model for the measurement of its property, plant and equipment and due to the nature of its operations; the company has a policy of revaluing its property, plant and equipment on an annual basis. The net replacement value method is used.
The company transfers the revaluation surplus to retained earnings as the asset is used.
The fair value of the plant was estimated using discounted cash flows by an independent valuer at 30 June 20X6 and 30 June 20X7 as shown in the following table. The useful life and residual value remained unchanged.
30 June 20X6
C 825 000
30 June 20X7
C 400 000
The profit before tax has been correctly calculated at C 300 000 for the year ended 30 June 20X7.
There were no indicators of impairment at any stage during the year.
The corporate tax rate is 29% and has not changed since the plant was purchased. There are no permanent or temporary differences other than those apparent from the information given.
a) Prepare all the journal entries relating to the plant for the year ended 30 June 20X6
b) Prepare relevant extracts from the statement of comprehensive income and statement of changes of equity of Greenhouse Limited for the year ended 30 June 20X7 and relevant extracts from the statement of financial position at 30 June 20X7.
c) Prepare relevant extracts from the notes to the financial statements of Greenhouse Limited at 30 June 20X7.
The accounting policy for property, plant & equipment is required.
Accounting policies for statement of compliance, basis of preparation and deferred taxation are not required.
Comparatives are not required