Question 1

Thabo Ltd purchased a single plot of land on 1 January 20X1 for R1 600 000, measuring it
using the revaluation model. It measure the land’s fair value biennially (i.e. every second
year).

31 Dec 20x3 31 Dec 20x5 31 Dec 20x7

R R R
Fair value of land 3 040 000 928 000 2 240 000

Required:
Prepare all journal entries relating to land, for the years ending 31 December 20X1 to 31
December 20X7.

Question 2
Kama Ltd has a December year end. Its accountant has sent the following questions:
a. Explain the difference between the COST model and the REVALUATION model, and
what the terms actually refer to.
b. Plant cost R100 000 on 1/1/2021. Depreciation is provided at 20% per annum on the
straight line basis. The fair value is R90 000 at 1/1 2022. The residual value is
assessed to be zero and this has remained unchanged since acquisition. The company
wishes to apply the net replacement value method and to transfer the realised portion
of the revaluation surplus to retained earnings annually.
Required:
I) Calculate and journalise the change in value of the plant.
II) Calculate and journalise the depreciation of the plant for 2022.
III) Calculate and journalise the amount of the transfer from the revaluation surplus to
retained earnings and explain why the company makes this transfer.