On 1 July 2021, Ocean Grove Ltd acquired and installed an item of machinery for use in its manufacturing business. When acquired the machinery cost $1 200 000, had an estimated useful life of 10 years, and had unexpected residual value of $200 000. Ocean Grove Ltd depreciates machinery on a straight-line basis over its useful life and uses the cost method. At 30 June 2023 the machinery had a carrying amount of $1 000 000. At the end of the 2023 reporting period, the annual review of all machinery found that this particular item of machinery had incurred significant damage as a result of being rolled down a sand dune. As a result of the damage, the engineering department estimated the fair value less costs of disposal of the machinery at the end of the reporting period was $710 000. As the machinery can operate in a limited capacity, it could be expected to provide annual net cash flows of $105 000 for the next eight years. The expected residual value will remain unchanged. The management of Ocean Grove Ltd uses a discount rate of 8 per cent for calculations of this kind.

REQUIRED

Determine whether Ocean Grove Ltd has incurred an impairment loss in relation to the asset. If so, determine the amount of the impairment loss, and provide the journal entry necessary to recognize any impairment in the machine.