3 (25 marks) (A) Phonify Company is a phone case production company. On 1 January 2020, the company purchased a machinery at a purchase price of $100,000. Additional information: (a) Sales tax paid on the purchase price was 5%. (b) The company paid $8,000 for installation and $700 for testing of the machinery. (c) Income tax paid on income earned from the sale of phone cases manufactured by the machinery was $9,300. (d) Ordinary repairs to keep the machinery in good working order was $7,500 on 13 August 2020. Required: Determine the cost of machinery as at 31 December 2020. (5 marks) (B) On 1 January 2021, Lily Company purchased a freehold land at a cost of $3,000,000 and completed a major enhancement, lighting and driveway, to make the land more usable at a cost of $600,000. Estimated useful life was five years with no residual value. A new machinery at a cost of $80,000 was purchased on 1 July 2021. Estimated useful life was five years with an estimated residual value of $4,000. The year-end of Lily Company is 31 December. Required: (a) Assume Lily Company uses the straight-line method, compute the depreciation expense for the year ended 31 December 2021 for the following assets. (i) Freehold land; (ii) Land improvement; and (iii) Machinery. (6 marks) (b) Compute the carrying amount of the total non-current assets in (a) on 31 December 2021. (4 marks) (C) Cauliflower Limited purchased an equipment at $400,000 on 1 January 2021. It has been depreciated using the double-declining-balance method based on an estimated residual value of $60,000 and an estimated useful life of 4 years. On 31 March 2022, the equipment was sold for $250,000 cash. The year-end of Cauliflower Limited is 31 December." Required: (a) Compute the accumulated depreciation for the equipment as at 31 March 2022. (2 marks) (b) Prepare journal entries to record the disposal of equipment on 31 March 2022. Narration is NOT required. (4 marks) (D) Mia started her retail business this year. She had no accounting knowledge. When she received her first set of financial statements from her accountant, she was so confused with the accounting terms on the financial statements that was so difficult to understand. Required: Discuss whether the information given in the financial statements of Mia's business is useful with respect to the qualitative characteristic of "understandability". (4 marks) [Total marks for Question 3: 25 marks]