Wilderness owns and operates an item of plant that cost £640,000 and had accumulated depreciation of £400,000 at 1 October 2011. It is being depreciated at 12.5% on cost. On 1 April 2012 (exactly half way through the year) the plant was damaged when a factory vehicle collided into it. Due to the unavailability of replacement parts, it is not possible to repair the plant, but it stills operates, albeit at a reduced capacity. Also, it is expected that, as a result of the damage, the remaining life of the plant from the date of the damage will be only two years. Based on its reduced capacity, the estimated present value of the plant in use is £150,000. The plant has a current disposal value of £20,000 (which will be nil in two years’ time), but Wilderness has been offered a trade-in value of £180,000 against a replacement machine, which has a cost of £1million (there would be no disposal costs for the replaced plant). Wilderness is reluctant to replace the plant as it is worried about the long-term demand for the product produced by the plant. The trade-in value is only available if the plant is replaced.

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1 If the Plant is not replaced WILDERNESS Extract of Statement of Financial Position 30 September 20... View the full answer