940 10 of 15 6. A company acquired a machine on 1 January 2019 with associated costs as follows: Manufacturer's base price Trade discount (applied to base price) 31,250,000 20% Early settlement discount (taken on base price) Freight (carriage) charges 4% 375,000 Installation cost 650,000 Staff training in use of machine 1,062,500 Pre-production testing 562,500 Purchase of 3 year maintenance contract (per 250,000 annum) Estimated residual value Estimated life in machine hours Hours used -year ended 31 December 2019 -year ended 31 December 2020 625,000 75,000 15,000 18,000 7,500 -year ended 31 December 2021 On 1 January 2021, the machine was upgraded at a cost of 5,125,000-increasing the remaining life of the machine to 45,000 hours. The machine's estimated residual value was increased to 937,500. Required: (a) Discuss four areas of judgement in relation to depreciation within financial statements. (b) (8 marks) Show how the company would account for the machine and its associated costs for the years ended 31 December 2019, 2020 and 2021. Depreciation is based on machine hours used. (12 marks) Total 20 marks