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.