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FA II Assignment

The document discusses several questions regarding the classification and treatment of assets for Open Safari, a new ecotourism lodge: 1) It asks whether wild animals and trained staff are considered assets of Open Safari. 2) It inquires about what assets Open Safari would depreciate/amortize between 20X0-20X2 and when depreciation would start for each. 3) It also discusses judgements around componentization, depreciation methods, residual values, and useful lives that must be made for items of property, plant, and equipment. The document then provides additional context about the lodge's website launch, advertising costs, and opening for business in 20X

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Melaku Walelgne
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110 views6 pages

FA II Assignment

The document discusses several questions regarding the classification and treatment of assets for Open Safari, a new ecotourism lodge: 1) It asks whether wild animals and trained staff are considered assets of Open Safari. 2) It inquires about what assets Open Safari would depreciate/amortize between 20X0-20X2 and when depreciation would start for each. 3) It also discusses judgements around componentization, depreciation methods, residual values, and useful lives that must be made for items of property, plant, and equipment. The document then provides additional context about the lodge's website launch, advertising costs, and opening for business in 20X

Uploaded by

Melaku Walelgne
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Required:

a) Are the wild animals on Freelands assets of Open Safari?


b) Are the trained staff assets of Open Safari? (Note: Open Safari has incurred significant staff
training costs and some staff possess specialised skills that are essential for Open Safari’s
operations.)
c) Would Open Safari depreciate any of its PPE (amortise any of its intangible assets) during
20X0–20X2? If so, when would depreciation of each item of PPE start?
d) Other depreciation/amortisation issues (discuss judgements and estimates to be made in respect of
each item of PPE even if depreciation of the item will start only in 20X3):
 How to determine whether components of that item must be depreciated separately?
 How to determine which depreciation method must be used?
 How to determine the residual value?
 How to determine the useful life?
2. On 31 January 20X3 Open Safari’s website goes live, with a development cost of £100,000. The
website is Open Safari’s main link to its customers. The website provides much information about the
lodge and its ecotourism activities and allows customers to book safaris directly. In February and March
20X3 Open Safari runs an extensive advertising campaign in a range of leading international ecotourism
and natural interest publications ($50,000), promoting its exclusive ecotourism operations in Africania.
The Bilkersens also promote the lodge at trade fairs in Germany, France, the Netherlands (€30,000) and
the United Kingdom (£10,000) and by mailing the contacts on the purchased customer list. In April 20X3
the lodge opens for business and welcomes its first customers. In 20X3 the lodge incurs a small operating
loss. However, the loss is significantly smaller than the loss forecast by Makeit for Open Safari’s first
year of operations.

a. Is the website an asset of Open Safari?


b. Which assets would Open Safari depreciate/amortise for the first time in 20X3? When
would depreciation/amortisation start?
c. Other depreciation/amortisation issues (discuss judgements and estimates to be made in
respect of each item of PPE even if depreciation of the item will start only in 20X3):
o How to determine whether components of that item must be depreciated separately?
o How to determine which depreciation method must be used?
o How to determine the residual value?
o How to determine the useful life?

3. Ato. X an employee in a company is drawing Birr.22,500 per month as salary plus hardship allowance
at 10% of his salary. He is also getting the medical allowance of Birr.4,000 per month, commission 2,500
Birr per month. He is provided free of charge a sweeper whose wages are Birr1,500 pm and a gardener
whose wages are 2,500 birr per month. Compute his taxable salary for the month and tax payable for the
same.

4. The following are the particulars of income of Ato.Feleke for the year 2015.

 Salary Birr. 27,000 per month


 Hardship allowance Birr.4,500 per month
 Transportation allowance Birr.600 per month
 Employee’s contribution to Provident Fund 15% of salary
 Employer’s contribution to the Fund at 15% of salary
 He is provided with free lunch during office hours.
 The employer has given him the use of Feat car which he uses for official purposes. The
employer meets all the expenses which amount to Birr.4,000 pm during the year.

Compute the employment income of Ato.Feleke for the month.

Assignment I

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