A company purchased a machine at a cost of $6,000 1 January 2018. Its useful life is estimated to be 6 years and then it has no residual value. At 31 December 2019 it was estimated that the machine could be sold for $5,000. However, if the company could make a maintenance to the machine, it would be sold for $9,500. The maintenance fee was $1,500. And the company needed to pay a delivery fees of $1,200. At the same time, if the company continued to use the machine, management estimated that it would generate net cash inflows with a present (discounted) value of $2,100 per year. New plant of the same type would cost $9,000 at 31 December 2019.
(1) Calculate the amount of value for this asset shown in the financial statement at the year-end 2019 (use the straight-line depreciation method).
(2)Calculate the deprival value of this machine at year-end 2019.
(3)Explain the meaning of deprival value in this case
(4)Use this case to discuss the advantages and disadvantages of historical cost method.
(5)If you try to write a research paper based on this case with a stance of advocating alternatives to the historical cost method, would this paper be positive accounting theory or normative accounting theory?
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