Blackcutt is a local government organisation whose financial statements are prepared using International Financial Reporting Standards. Blackcutt wishes to create a credible investment property portfolio with a view to determining if any property may be considered surplus to the functional objectives and requirements of the local government organization. The following portfolio of property is owned by Blackcutt.
The economic life of Kayte’s vessels is estimated to be 30 years, but the useful life of some of the vessels is only 10 years because Kayte's policy is to sell these vessels when they are 10 years old. Kayte estimated the residual value of these vessels at sale to be half of acquisition cost and this value was assumed to be constant during their useful life.