ANNEXURE I: FORMATIVE ASSESSMENT 2 QUESTION 1 (27 marks) Kygo Limited is a manufacturing company with various production lines. You are presented with the following information on some of the company's machines: Machine A At the end of the current financial year, 30 June 2022, Machine A was damaged in a factory accident, but it is still in working order. On 30 June 2022, the fair value less costs of disposal of Machine A is less than its carrying amount. The value in use of Machine A cannot be determined independently of the value in use of the other assets. The smallest identifiable group of assets that includes Machine A and generates cash inflows that are largely dependent on the cash flows from other assets is the production line to which Machine A belongs. The value in use of the production line shows that the production line, taken as a whole, is not impaired. Machine B Machine B was also damaged in the factory accident, and due to the machine's damage, management reviewed its useful life, and it was estimated that Machine B had a remaining useful life of 5 years from 30 June 2022. The machine was acquired on 1 January 2018 at R1 010 000. Depreciation is calculated using the straight-line method over the expected useful life of 12 years. The machine has a residual value of R250 000. Management determined the asset's fair value to be R730 000, and the cost of disposal will amount to R20 000. The value in use of the machine was calculated to be R700 000. Ignore any tax implications.