Panama Limited purchased a machine on 1 January 2017. The following details are applicable: Note N$ Purchase price 1000 000 Delivery costs 30 000 Installation costs 60 000 General administrative costs 10 000 Costs of testing 50 000 Pre-production costs 20 000 Initial operating losses 100 000 1270 000 Additional information: 1. The purchase price of N$1000 000 is only payable on 31 December 2017. The supplier of the machine does not usually allow credit for the purchase of similar machines, but has made an exception for you. Using the interest rate of 14%, the discounted present value of the purchase price on 1 January 2017 is N$ 877 190. 2. The administrative costs are of a general and indirect nature. 3. The costs of testing comprise costs incurred to produce samples while testing whether the machine is functioning properly. Samples were sold at net proceeds of N$5000. 4. The pre-production costs were necessary to bring the machine to the condition necessary to be able to operate in the manner intended by management. 5. The initial operating losses are attributable to the initial production of small quantities 6. The asset was ready for use on 3 January 2017 and immediately put into use. 7. The machine will be depreciated using the straight-line method over eight (8) years, taking into account a residual value of N$70 000. 8. Assume that a liability exists to dismantle and remove the machine at the end of its useful life at a cost of N$35 000 (discounted present value equals N$17 000) 9. Ignore VAT. YOU ARE REQUIRED TO: a. Calculate the cost at which the asset will be recognised. (10 marks) b. Calculate the carrying amount of the asset on 31 December 2015