Question 1 (20 marks) Dondon Machinery Limited (DML) sold 100 machines for cash of $5,000 each in the year of 2018. All machines are under warranty until the end of 2019. DML estimates, based on past experience with similar machines, that the warranty cost will be an average of $200 per unit. Further, as a result of claims from customers, it paid cash of $4,000 in 2018 for warranty costs. Bibu Machinery Limited (BML) has sold equipment on 1 January 2017 at $100,000. It has agreed with the customer that it will repurchase the equipment on 31 December 2018 at $110,250. Assume an interest rate of 5% per annum is imputed in the agreement. As at 31 December 2018, BML has some unfinished inventory with a cost of $900. Expected selling price of finished inventory is $1,000, BML expects to incur an additional cost of completion of $50 and selling cost of $200. Required: Explain the three characteristics of a liability. a. (3 marks) Prepare all journal entries for DML in the year of 2018. b. (6 marks) c. Explain the substance of a repurchase agreement. (2 marks) d. Prepare all journal entries for BML in the year of 2018 in relation to the equipment. (4 marks) e. Define net reasliable value. (2 marks) f. Calculate the net reasliable value of the unfinished inventory for BML as at 31 December 2018 and the loss of inventory write-down for the year ended 31 December 2018. (3 marks) [Total for Question 1: 20 marks]