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Flightline is an airline which treats its aircraft as complex non-current assets. The cost andother details of one of its aircraft are: $000 Estimated life
Exterior structure – purchase date 1 April 1995 120,000 20 years
Interior cabin fittings – replaced 1 April 2005 25,000 5 years
Engines (2 at $9 million each) – replaced 1 April 2005
No residual values are attributed to any of the
component parts.
18,000 36,000 flying hours
At 1 April 2008 the aircraft log showed it had flown 10,800 hours since 1 April 2005. In theyear ended 31 March 2009, the aircraft flew for 1,200 hours for the six months to
30 September 2008 and a further 1,000 hours in the six months to 31 March 2009.
On 1 October 2008 the aircraft suffered a ‘bird strike’ accident which damaged one of the
engines beyond repair. This was replaced by a new engine with a life of 36,000 hours at costof $10.8 million. The other engine was also damaged, but was repaired at a cost of
$3 million; however, its remaining estimated life was shortened to 15,000 hours. The
accident also caused cosmetic damage to the exterior of the aircraft which required
repainting at a cost of $2 million. As the aircraft was out of service for some weeks due to
the accident, Flightline took the opportunity to upgrade its cabin facilities at a cost of
$4.5 million. This did not increase the estimated remaining life of the cabin fittings, but the improved facilities enabled Flightline to substantially increase the air fares on this aircraft
Required:
Calculate the charges to the statement of profit or loss in respect of the aircraft for the
year ended 31 March 2009 and its carrying amount in the statement of financial position
as at that date. Note: The post accident changes are deemed effective from 1 October
2008Ravi, you have the full workings set out for you in the printed answer – why do you expect me to replicate those workings?
Which part of the printed solution is it that you don’t understand and let’s see if we can go from that point
OK?
Look lower down on this thread:
https://opentuition.com/topic/depreciation-50/ – it was active just 6 days ago
I have calculated this;
Exterior structure 120000000/20 =6000000
interior structure 25000000/5 =5000000
Engines 18000000/36000 =500 per hr
Now I dont know what to do nextHere’s another link:
https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/f7mys_2009_jun_a.pdf
This is the link to the ACCA’s own answer – follow their printed solution until you arrive at a figure that you don’t understand and then post again – I’ll leave the thread open for you
I calculated carring amount(understood till there)
Exterior Structure 120000 (78000) 42000
interior structure 25000 (15000) 10000
Engines 18000 (5400) 12600I didn’t understand from where 84000 came from for accumulated depreciation as I got 78000..and I didn’t understand anything after that..
The exterior has been depreciated for 13 years as at the start of the year at the rate of $6,000 per annum
Nothing has changed vis a vis the exterior so the depreciation for this year is still $6,000 and if we add that to the brought forward amount of $78,000 we arrive at $84,000
That explains where the $84,000 has come from … does that also help you to understand where the rest has come from?
the printed workings are clearly written out for you so I’m sorry but you’re going to have to be precise about exactly which figures you do not understand … it’s no use saying “I didn’t understand anything after that” because for me to sort that problem out will involve me in typing out / copying out the printed solution
Identify the rogue figures and I’ll explain them
OK?
The value for interior cabin fittings after accumulated depreciation is 10000000…in the marking scheme they subtracted 2500000 which was then 7500000 so where did 2500000 come from?
Engines
it is added 7500000+4500000 which is 12000000
12000000×(6/18)..where is 18 coming from?By the time the plane was damaged, those cabin fittings had been used for 3.5 years
Following the repairs to the engines there were still 18 months useful life left in the cabin fittings and we’re looking at the last 6 months of the current year after the repairs had been completed … so that’s where 6/18 comes from
The cabin fittings cost 25 million and had an original estimated useful life of 5 years
At the start of the current year the brought forward depreciation on those 3 year old fittings was 15 million (3 years at 5 million per year) At the date of the engine damage, we’re another 6 months into the fittings’ life so, at the rate of 5 million for a full year, the depreciation for half a year was 2.5 million and that’s where the 2,500,000 comes from
OK?
for Engines
it was 700000(300000+400000)
how was that calculated as I have done 10800000/36000 =300 then where did 300000 and 400000 come fromBefore the accident the engines were being depreciated at a rate of 500 per flying hour.
So, at the date of the accident, each engine had a carrying amount of 6 million ((12,600 – 600)/2) and this figure represents the loss on disposal of the written off engine.
The repaired engine’s remaining life was reduced to 15,000 hours so future depreciation on the repaired engine will be 400 per flying hour and that gives us a depreciation charge of 400,000 for the six months to 31 March, 2009.
The new engine with a cost of 10·8 million and a life of 36,000 hours is to be depreciated by 300 per flying hour, resulting in a depreciation charge of RM300,000 for the six months to 31 March, 2009 …
… and that’s where the 400 and the 300 come from
OK now?
in statement of financial position under interior cabin the cost was 29500000(25000000+4500000) but how was accumulated depreciation calculated in order to get 21500000?
Ravi, this is ridiculous! I’m going to cut and paste the printed solution – it’s all there clearly written out for you!
Cabin fittings – at 1 October 2008 the carrying amount of the cabin fittings is RM7·5 million (10,000 brought forward – 2,500 (half a year at 5,000 per full year)). The cost of improving the cabin facilities of RM4·5 million should be capitalised as it led to enhanced future economic benefits in the form of substantially higher fares. The cabin fittings would then have a carrying amount of RM12 million (7,500 + 4,500) and an unchanged remaining life of 18 months. Thus depreciation for the six months to 31 March 2009 is RM4 million (12,000 x 6/18).
OK?
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