Problem: Lucid Advisory Services Limited
The financial year-end for all clients of Lucid Advisory Services Limited is 31 December
• On 1 January 2018, Gallagher Limited purchased a plant with a remaining useful life of five years for a cash price of R3 300 000. After five years, the plant must be dismantled at an estimated cost of R750 000. An appropriate pre-tax discount rate is considered to be 10%.
• Faster Limited entered into a contract to provide certain service. The total contract price is R230 000 and the total costs to completion are R290 000. According to the contract conditions, there is a penalty of R23 500 if the contract is cancelled.
Task
• Discuss how each of the above events should be treated in the financial statements of each of the clients for the year ended 31.
• December 2018, in accordance with the International Financial Reporting Standards.