Explain how should the above machine be recorded

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Reference no: EM133121402

Question - Martin is running a business and the financial year ended 31 December each year.

During the year of 2021, Martin is considering to trade-in a machine in part exchange for a new model. The machine if he traded-in cost RM44,000 when he bought it in July 2018 for RM100,000. He needed to pay the supplier the balance of RM32,250 by cheque for the new machine.

Martin depreciates machinery at 20% per annum on the reducing balance basis. He charges a full year's depreciation in the year of acquisition. No depreciation is charged in the year of disposal.

Required -

(i) Apply an appropriate concept to explain how should the above machine be recorded in books of accounts if Martin decided not to trade-in it for the year ended 31 December 2021?

(ii) Explain how should the above machine be recorded in the Balance Sheet if Martin decided to trade-in it for the year ended 31 December 2021?

(iii) Briefly explain TWO (2) benefits of applying historical cost concept in the valuation of non-current assets.

Reference no: EM133121402

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