Question 1 (30 marks) Crown Manufactures Limited bought a manufacturing machine on 1 January 2015 at the cost of R650 000. The useful life of the machine was estimated at 12 years. The company's policy is to revalue assets to their net replacement cost every three years. On 31 December 2017, the machine was revalued to its net replacement cost of R500 000, and a revaluation gain of R12 500 was recognised. The revaluation surplus is realised on the sale of the assets. At the end of 2019, there were indications that the machine was impaired. Management determined the following values to be applicable on 31 December 2019: R360 000 Fair value less costs of disposal Value in use R350 000 Ignore any tax implications. Required: 1.1) Discuss when an entity will be required to undertake an impairment test. (7 marks) 1.2) Prepare the journal entries required in the records of Crown Manufactures Limited for the year ended 31 December 2019 to account for the machine's impairment. (12 marks) 1.3) On 31 December 2020, Crown Manufactures Limited determined that the circumstances that lead to the impairment in 2019 no longer existed and that the machine had a recoverable amount of R340 000. Prepare the journal entries required in the records of Crown Manufactures Limited for the year ended 31 December 2020 to account for the reversal of the machine's impairment. (11 marks) Round all answers to the nearest Rand. 3 HFAC332-1-Jan-Jun2021-SuppSA1-CP-V3-17062021 Competency Framework Reference: III-2.1 Develops or evaluates accounting policies in accordance with IFRS Identifies the economic substance financial transactions in order to correctly identify the appropriate IFRS and accounting treatment III-2.2 Accounts for the entity's routine transactions Analyses and calculates, or evaluates, the accounting for routine transactions (e.g. sales, cost of sales, operating expenses)