Reference no: EM133039298

Question - On 1 July 2021, Cosy Corner Ltd acquired and installed an item of plant for use in its manufacturing business. When acquired, the item cost $900,000, had an estimated useful life of 10 years, and had an expected residual value of $30,000. Cosy Corner Ltd depreciates manufacturing plant on a straight-line basis over its useful life. Cosy Corner Ltd measures property, plant and equipment at cost. At the end of the 2023 reporting period, the annual review of manufacturing plant found that the item of plant had incurred significant damage. As a result of the damage, the engineering department estimated the fair value less costs of disposal of the plant at the end of the reporting period was $500,000. As the plant can operate in a limited capacity, and apart from the residual value of $10,000, it could be expected to provide annual net cash flows of $100,000 for the next eight years. The expected residual value will remain unchanged. The management of Cosy Corner Ltd uses a discount rate of 6 per cent for calculations of this kind. Provide the accounting journal entries to record the change in the value of the asset.