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Blueberry Ltd with 31 August financial year end invested in an automated plant on 1 September 2014, which was carried in the book at cost. The company has decided to value the plant at fair value on its balance sheet date on 31 August 2020. The plant has an estimated life of 10 years and it is depreciated on a straight-line basis over its useful economic life from the date of its purchase. The machine is expected to generate 800,000 cash flows each year during the remaining period of its useful life. It was estimated at the time of purchase that the plant will have a residual value of 80,000 at the end of its useful life. The companys cost of capital is 12% per annum. Currently, there is no active market for used (second-hand) plants and no similar plants against which the fair value could be compared. The finance director gave the accumulated depreciation figure as 3m.

REQUIRED:

1. Calculate the annual depreciation charge
2. Determine the original cost of the plant
3. What is the historical net book value?
4. Calculate the fair value and unrealised gain/loss at the financial year-end. Also, state whether you measured the asset at hierarchy level 1, 2 or 3 and why.
5. State any TWO (2) measurement disclosures that should be made based on your fair value method to value this asset?

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