Mallee Downs a wheat farm located in north-west Victoria harvesting wheat and barley. The farm provides the following details relating to one piece of machinery, a Combine Harvester.

Asset Register:

Machine: Combine Harvester 2011 John Deere 9770 5TS

Cost at Purchase: $500,000 (GST excluded)

Date of Purchase: 1 July 2011

Depreciation: Straight-line, 9% per annum on cost with $0 residual value.

Revaluation: No revaluation has taken place.

Mallee Downs

Balance Sheet (Note) as 30 June 2019 $

Combine Harvester 2011 John Deere 9770 5TS 500,000

Accumulated depreciation 360,000

Carrying Amount $140,000

Maintenance Note:

The original air-conditioner located in the control cabin cannot be fixed and a new air-conditioner is purchased and installed.

Details of the new air-conditioner are

• New unit part: John Deere 9770 5TS air- conditioning unit
• Date of purchase: 1 September 2019
• Purchase cost and installation: $10,200 plus $3,800 installation cost.
• Yearly service on the Combine Harvester John Deere 9770 5TS was completed at a cost of $2,500.

Additional Information:

The financial year is 1 July 2019 to 30 June 2020

Required:

As the Accountant for Mallee Downs wheat farm, advise the bookkeeper on how to treat the new air-conditioner acquired (purchased) on 1 September 2019.

In your advice, the following discussion point should be considered.

1. How to recognise the new air-conditioner purchased on 1 September 2019 in terms of cost and classification.
2. How would the new air conditioner be depreciated? Need to support your claim.
3. How would Mallee Downs disclose the acquisition of the new air-conditioner in the financial reports for the financial ending 30 June 2020?