QUESTION 2 Camel Trading Limited lasses an industrial site close to a game reserve. The company recently obtained the approval for heavy Plant and machinery to operate on the site for a period of five years. The approval is in terms of a license granted by the government. The Minister of Environment & Tourism approved the license because the main activity of Camel Trading Limited is the production of environmentally friendly paper from recycled matenal The plant was purchased on 1 October 2020 for N$1 000 000. Installation costs of N$175 480 were incurred and paid over the months of October, November and December 2020. The plant and machinery were in a condition necessary to be capable of operating in the manner intended by management on 1 January 2021. The plant and machinery has an estimated useful life of five years with no residual value. In terms of the license, Camel Trading Limited is obliged to dismantle the plant and machinery and restore the area at the end of its useful life. Future decommissioning costs are expected to be N$120 000. The company uses a discount rate of 10% to calculate the present value of the decommissioning costs.
The financial accountant prepared the following schedule reflecting the unwinding of the discounted decommissioning costs to its present values:
DATE | |YEAR OF Decommission | 10% discount |
01/1/2021 5 | 0.621 |
31/12/2021| 4 |0.683 |
Required: a) Prepare all journal entries relating to the above transactions that would have been processed in the accounting records of Camel Trading Limited for the years ended 31 December 2020 and 31 December 2021. Show all workings. (6)
b) Prepare the relevant extracts from the statement of profit or loss and other comprehensive income for the year ended 31 December 2022 and from the
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