Mountain Spring Distributors Limited (MSDL) is a distributor of plastic household products, located in Grange Hill, Westmoreland. The company was incorporated on the 1st of January 2019 with a share capital of 6,000,000 ordinary shares of $2. On the date of the incorporation the company acquired two (2) delivery trucks at a cost of $8,000,000 each and decided to depreciate the trucks using the units of output method. The company planned to keep the trucks for a useful life of 200,000 miles each. The residual value of each truck is estimated to be $1,000,000 each after 300,000 miles. On January 1, 2020 MSDL issued 7% convertible bonds at their nominal value of $48,000,000. The bonds are convertible at any time up to maturity into 50 ordinary shares for each $600 of bond. Alternatively, the bonds will be redeemed at par after 4 years. Similar non-convertible bonds carry an interest rate of 10%. On January 1 2021, the company issued 2,000,000 ordinary shares at a price of $3.50 which was fully subscribed. This was followed by a bonus issue of 1 share for 5 held on that date, funding from the share premium account which at that date had a balance of $700,000 and retained earnings a balance of $520,000. The company bought a machine on January 1, 2021 for $15,000,000, which also incurred freight charges of $500,000, installation fees of $200,000, and custom duties of $2,000,000. At the date of purchase the asset had an estimated useful life of 10 years. The asset is to be depreciated using a straight-line basis to a nil residual value. However, on July 1, 2022 the entitys operations have changed and management has committed to a plan of sale. The asset has been marketed at its fair value of $9,000,000 million and an active buyer was located. On further assessment indicates that cost to dispose of the asset will be $900,000. On June 30, 2022 one of the delivery trucks is involved in an accident and is sold for $700,000. MSDL replaces this truck with a new truck at a cost of $9,000,000. The residual value of this truck is $1,200,000 after using it for 300,000 miles. On January 1,2023 the directors of the company decided to lease a specialised computer system under a four-year lease commencing on that date. The computer systems remaining expected useful life is four years. Four payments are due to the lessor in the amount of $1,500,000 per year beginning December 31, 2023. The lessees incremental borrowing rate is 20% and the rate lessors implicit rate is 18%.

a.Discuss whether the treatment of the asset by the company is correct, in accordance with IFRS 5. Prepare the relevant financial statements extracts for the year ending December 31, 2021 with regards to this machine