On 1 April 2018, assume an operator of this machine broke an important part. On that occasion,

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Question:

On 1 April 2018, assume an operator of this machine broke an important part. On that occasion, your managers hired expects to provide the below information:

Market A / Market B

Disposal costs $ 3,000 / $ 15,000

Transaction costs $ 1,000 / $ 500

Transport costs $800 / $2,000

Expected selling price $ 220,000 / $ 280,000

Expected cash flow $25,000 / $ 40,000

Discount rate (monthly) 1.08% / 1.02%

Market A is the most commonly used by the company for identical machines. However, transactions are infrequent and sometimes the users are unreliable (fake profiles). Market B has a sentimental attachment as the company's directors usually go there to celebrate their annual achievements. This market has the most reliable users for similar machines traded on ongoing basis.

Required:

a. Prepare the relevant journal entries for the financial year ended on 30 June 2018

b. Based on the previous question, state any assumptions you made.