SunnySide (Pty) Ltd (“SunnySide”) is a cap manufacturer based in sunny Mpumalanga. Their financial year end is 31 December. On 1 January 2017 SunnySide bought a property for R2 500 000 (20% for land and 80% for buildings). This was correctly classified as property, plant and equipment in the books of SunnySide as they used the building in their production process. On 01 January 2019, SunnySide decided it would change its intentions, and lease the land and building to one of their competitors. The fair value on this date was the same as the fair value on 31 December 2018. The fair value of the land and buildings at various dates are as follows (20% for land and 80% for buildings): 31 December 2017: R2 550 000 31 December 2018: R2 800 000 31 December 2019: R3 000 000
SunnySide (Pty) Ltd (“SunnySide”) is a cap manufacturer based in sunny Mpumalanga. Their financial year end is 31 December. On 1 January 2017 SunnySide bought a property for R2 500 000 (20% for land and 80% for buildings). This was correctly classified as property, plant and equipment in the books of SunnySide as they used the building in their production process. On 01 January 2019, SunnySide decided it would change its intentions, and lease the land and building to one of their competitors. The fair value on this date was the same as the fair value on 31 December 2018.
The fair value of the land and buildings at various dates are as follows (20% for land and 80% for buildings):
31 December 2017: R2 550 000
31 December 2018: R2 800 000
31 December 2019: R3 000 000
Additional information:
SunnySide carries all investment property using the fair value model.
SunnySide carries all property, plant and equipment using the cost model.
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SARS allows a S13 allowance on the buildings at 4% per annum, not apportioned. No allowances are granted on land.
The applicable tax rate is constant at 28% (inclusion rate for
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