Part B

Block Masters Limited $("$Block Masters"$)$ is a company that produces and duplicates digital video disks $($DVDs$)$ on behalf of movie houses such as Andrew Brothers, Pony and Galactic Studios. The company's financial year$-$end is $30$ June $2024.$

The directors decided to sell the company's existing DVD duplication division because of growing competition from video on$-$demand and streaming services such as PayFlix. All the requirements for classification of the assets as held for sale were met on $30$ April $2024.$ A binding sales agreement regarding the machine was concluded on this date and management expects the cash sale to be completed on $10$ August $2024.$

DVD duplication division

Block Masters acquired a DVD duplicating machine on $1$ March $2021$ for R$3600000$ and was available for use, as intended by management, on acquisition date. On acquisition date the useful life of the machine was determined to be $995000$ units and the residual value R$600000.$ From acquisition date until $30$ June $2023$ the machine produced $155000$ units. During the current financial year until $30$ April $2024,$ the machine produced $15000$ units. Throughout the period the residual value of the machine remained unchanged however the estimated total useful life was revised to $750000$ units on $30$ June $2023.$

Block Masters owns a property that is used as a warehouse and distribution center. The property was originally acquired on $1$ October $2020$ for R$4500000($land R$1250000,$ building R$3250000).$ The property was available for use, as intended by management, on acquisition date and was also brought into use on this date. On acquisition date, a residual value of R$250000$ was allocated to the building and the useful life of the building was estimated to be $40$ years.

On $30$ April $2024$ inventory with a cost of R$105000$ and net realizable value of R$72000$ remained unsold at Block Masters' warehouse.

The fair value of the DVD duplication division on $30$ April $2024$ amounted to R$4372000$ and the commission on sale of all items in the disposal group was estimated at R$50000$