IAS 16

QUESTION 1 On 1 October 2017 an entity acquired a machine under the following terms. Hours $ Manufacturer's base price 1 050 000 Trade discount (applying to base price only) 20% Early settlement discount taken (on the payable amount of the base cost only) 5% Freight charges 30 000 Electrical installation cost 28 000 Staff training in use of machine 40 000 Pre-production testing 22 000 Purchase of a three-year maintenance contract 60 000 Estimated residual value 20 000 Estimated life in machine hours 6 000 Hours used – year ended 30 September 2018 1 200 – year ended 30 September 2019 1 800 – year ended 30 September 2020 (see below) 850 On 1 October 2019 the entity decided to upgrade the machine by adding new components at a cost of $200 000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine. The upgrade also increased the estimated remaining life of the machine at 1 October 2019 to 4 500 machine hours and its estimated residual value was revised to $40 000. Required Prepare extracts from the Statement of Comprehensive Income and Statement of Financial Position for the above machine for each of the three years to 30 September 2020 in accordance to the requirements of IAS 16: Plant, property and equipment.