Question

Street Limited prepares its financial statements to 31 December each year, and at 31 December 2014 the company owned four properties: Bruce, Clarence, Roy and Steve. On 1 January 2013, Street Limited acquired Bruce and Clarence, two sites located in out-of- town shopping centres. Construction on each site commenced on 1 January 2013 and was completed on 31 December 2013. Details of the costs associated with the construction are as follows: Bruce Clarence £'000 2,000 Land Direct materials Direct labour Direct overheads £000 1,800 1,400 300 240 3,740 1,600 400 260 4,260 Street Limited financed the construction of Bruce and Clarence by issuing a £10,000,000 zero-coupon bond on 1 January 2013. The bond is redeemable on 31 December 2016 with a one-off payment of £13,605.442. While both properties were brought into use on 1 January 2014, Bruce was retained by Street Limited for its own use whereas Clarence was rented commercially to an unrelated company. Street Limited owns two successful golf courses, Roy and Steve, and the company intends to develop this specialist part of its business. These two courses were professionally valued on 1 January 2014, the details of which are as follows: Historical Cost Net Book Current Use Value Value £'000 45,000 48,000 Historical Cost Market Value £'000 000.3 75,000 35,000 56,000 37,500 60,000 Roy Steve 80,000 The buildings element of Roy and Steve represents 50% of both the historical cost and revalued amounts, and their remaining useful economic life at 1 January 2014 was 30 years. It was company policy to record all owned properties at historic cost and to depreciate them over their estimated useful economic life of 50 years on a straight-line basis. However, with effect from 1 January 2014, the directors of Street Limited have decided to record Roy and Steve at valuation in the financial statements. The directors do not intend to obtain valuations for Bruce and Clarence or other non-current assets held by the company.

The question is complete

Answer 1

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