Question 2
20 Marks
Petronella limited, a Namibian Company that manufactures perfumes, bought 16 new fragrance-
testing machines for use in its laboratory plant in Windhoek. The machines were imported from
Paris, a company based in France (currency of Euro's: €) that produces equipment for companies in
the perfume industry.
Details relating to the purchase ofthese machines are as follows:
• The machines were ordered on 25 April 2020.
• The machines were shipped on 15 June 2020.
• The machines arrived in Namibia on 1 September 2020.
• The total invoice price was €30 000, invoiced on a free on-Board basis (FOB).
• Petronella paid the French supplier on 30 September 2020.
The machines needed to be installed before they could be put into operation:
• Installation was completed by Dona Limited on 25 September 2020.
• Dona Limited furnished the company with an invoice for N$60 000.
• The machines were available for use on 1 October 2020 but due to labour unrest, these
were only brought into use on 31 October 2020.
The machines have a residual value of N$50 000, a useful life of 8 years and the appropriate method
of depreciation is straight-line.
Due to the impact of Covid pandemic on the economy, it was determined as at 31 December 2020,
the recoverable amount of the machines is N$400 000.
Petronella's Limited functional and presentation currency is the Namibian Dollar (N$). Its year end
is 31 December.
Date
25 April 2020
15 June 2020
01 September 2020
25 September 2020
30 September 2020
31 October 2020
Spot Rate
NAM dollars (N$}: Euro (€}
13.50:1
13.75:1
13.80:1
14.10:1
14:20:1
14:40:1
Required:
a) Show all journals in the books of Petronella Limited for the year ended 31 December 2020.
Ignore tax.
(12 Marks)
b) Based on the above journal entries, disclose the carrying amount of the machines as item of
Property, plant and equipment would appear in the Statement of financial position of
Petronella Limited for the year ended 31 December 2020, in accordance with International
Financial reporting standards. Notes accounting policies are required. No comparatives
required.
(8 Marks)
[Total: 20 Marks]
3