Part (a) Explain what is meant by an accounting policy? What is Wesfarmers accounting policy in relation to the recognition and measurement of property, plant and equipment? Has this policy been developed by Wesfarmers or is it required by an accounting standard? What are the key estimates that require the use of management judgement made by Wesfarmers in relation to property, plant and equipment? (2 marks)

Part (b) What is the method used when an entity changes an accounting estimate? How does this differ from the method used to make a voluntary change in an accounting policy? (2 marks)

Part (c) On 1 July 2019, Excelsior Ltd paid $140,000 for an item of machinery. On this date, it was estimated that the item of machinery had a useful life of eight years and a residual value of $12,000. Excelsior Ltd uses the straight-line method of depreciation for all items of property, plant, and equipment.

In early August 2021, the item of machinery overheated and was unable to be used for two months. It then repeatedly broke down between October 2021 and February 2022. After extensive repairs were carried out in March 2022, management of Excelsior Ltd engaged the services of a consulting engineer who, after an evaluation of the item of machinery, advised that, as at 30 June 2022, the remaining useful life of the item of machinery was four years (that is, seven years in total). Management of Excelsior Ltd revised the useful life of the item of machinery in accordance with the advice of the consulting engineer and also revised the estimate of the residual value of the item of machinery from $12,000 down to $3,000.

Required Complete the following table:

Year ending | Depreciation expense for the year |Accumulated depreciation |Carrying amount:

30 June 2020

30 June 2021

30 June 2022

30 June 2023

30 June 2024

30 June 2025

30 June 2026