QUESTION 3 (14 marks) The end of ABCs reporting period is 30 April 2018. During the past two years, the following transactions transpired relating to a machine: On 15 June 2016 ABC orders a one-of-a-kind machine at a price of N$800 000 to manufacture extra small MP3 players and paid in cash. The machine was delivered to ABCs factory on 28 July 2016 and was installed and ready for use on 1 August 2016. The first products were manufactured on 16 August 2016. The following costs (excluding VAT) were incurred to get the machine ready for use and was expensed to an Asset installation cost account: N$ Import duties (non-recoverable) 150 000 Testing costs (to ensure that the machine was fully operational before starting actual production) 20 000 Advertising costs of new product 50 000 Installation costs 30 000 The depreciation policy for the machine is to write off such assets on a straight line basis at 20% per year. By 30 April 2017, management realised that there was not really a great demand for the extra small MP3 players and that sales were much lower than expected. They realised that there was no active market for the machine and were unable to determine its fair value. They estimated that they would generate the following cash flows from the use of the asset in the future: Year 1 Year 2 Year 3 Sales of MP3 players 390 985 355 993 288 554 Maintenance costs -20 385 -22 378 -28 375 Operational costs -40 567 -43 058 -46 129 Net cash inflows 330 033 290 557 214 050 Present value factors for a discount rate of 10% are as follows: Year 1 0,909 Year 2 0,826 Year 3 0,751 (If you use these factors for calculations, round off to the nearest NAD). Based on the information above, early in May 2017 management estimated that the machine only had a remaining useful life of 3 years and that the residual value at the end of such life would be N$100 000. At the end of April 2018, managements view was confirmed that there was virtually no demand for the MP3 players. They had already started negotiating a deal Page 14 of 14 with a Nigerian buyer for a price of N$680 000. It is estimated that selling costs will be N$30 000. You may assume that the requirements in order to classify this machine as a noncurrent asset held for sale have been met. REQUIRED Recognise all the transactions from the information above through journals with proper narrations in ABCs financial records for the period ending 30 April 2017 and 30 April 2018.(14)