Problem:
Tromp Limited is an investment company that purchases buildings and holds them for a number of purposes such as resale, leasing and its own use.
Tromp Towers
On 1 January 20X4, Tromp Limited purchased and old building for C300000
Conveyance's fees amounted to C20000.
This building has always been fully let out.
This building is situated in an isolated part of Baluchistan and there is no development anywhere nearby. As a result there is no market for buildings in this area and therefore a fair value is not reliably ascertainable.
On 31 July 20X4, the directors decided to repaint the building. The repainting was done ata total cost of C50000.
This building has never had an air conditioning system. After numerous complaints from tenants a about not being able to tolerate the Baluchistan heat, Tromp Limited decided to upgrade the building by installing a ducted air-conditioning system on 1 October 20X4.
The cost of installation included the following:
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C
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Adjustments to the structure
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30,000
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Air-conditioning units
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200,000
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Installation costs
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50,000
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On December 20X4, a huge property boom took place in the area, with the result that the fair value of Tromp Tower could now be determined. Tromp Limited does not, however, wish to change their policy of measuring investment property using the cost model.
The building has a 10 year useful life and a nil residual value.
The ducted air-conditioning system has a 10 year life and a nil residual value.
Tromp Limited also holds other investment property, all of which are carried under the fair value model. The fair values are as follows:
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C
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1 January 20X4
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1000000
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31 December 20X4
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1250000
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Required:
Journalize the entries that would arise from the above information for the year-ended 31 December 20X4.