ACBP6211 - Beacon Limited Case Study - Accounting Assignment Help

Assignment Task

Question 1 - Beacon Limited has approached you to provide accounting services to their company. On 1 July 2017 Beacon Limited acquired two Buildings. Building 12 South Road and Building 20 North Road. Building 12 South Road will be used as Beacon Limited’s head offices while Building 20 North Road has been purchased with the intention to lease out and earn rental income. The building on 20 North Road, cost R1 700 000 to construct. Beacon also incurred the following costs on 1 July 2017 – abnormal wastage costs of R50 000, transaction costs of R10 000 and legal costs of R120 000. This building is expected to have a useful life of 25 years. On 31 May 2018, a recognised independent valuer has assessed the fair value of this property to be R2 000 000. The building on 12 South Road was purchased for R1 500 000. Beacon Limited depreciates buildings at 10% p.a. on the straight-line method. No residual value anticipated. The accounting policy of Beacon Ltd is to measure investment property using the fair value model.

Q.1.1 Explain briefly why the Building on 20 North Road will be classified as an investment property.

Q.1.2 Calculate the cost of the investment property to be recognised in the books of Beacon Ltd on 1 July 2017.

Q.1.3 Prepare the journal entries to record all transactions relating to the capitalisation of both buildings in the books of Beacon Ltd for the year ended 31 May 2018. Narrations are required as marks will be allocated to these.

Q.1.4 How would your answer to Q.1.3 above change if Beacon Ltd used the cost model to measure investment property?

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