Sinha Airways owns many of its aircraft. The useful lives and residual values may be influenced by external changes to economic conditions, demand, and new technology. Analytical procedures show that depreciation expense is down by \( 8 \% \) compared to prior years. Evaluate inherent risk for depreciation expense.
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You are an accountant at a large research university. The controller is considering switching its accounting policy so that it is in line with other universities. The current policy requires all assets to be depreciated on a straight-line basis with no salvage value and a full year of depreciation taken in the year of acquisition, regardless of the acquisition date. The proposed policy would require all assets to be depreciated on a straight-line basis with no salvage value, and depreciation taken based on the nearest full month from the acquisition date. The data provided shows all assets that are in use, even though some assets have already been fully depreciated. The controller has provided a dashboard visualization that shows the differences between the two depreciation policies for the period ending December 31, 2018, and asks you to answer the questions below. Click here to view the data in Tableau, and here to view it in Power BI. (The Tableau and Power BI files contain the same data; you can use either to answer the questions in this assignment. Your instructor may specify which program they prefer you to use!) How to Access Tableau: You can open the Tableau file in this problem statement with Tableau Desktop software. If you don't have Tableau Desktop, you can download Tableau Reader, a free program that allows you to open Tableau visualizations. To get it, search for "Tableau Reader" in your internet browser, or click here. How to Access Power BI: You can open the Power BI file in this problem statement with Power BI Desktop. If you don't have it already, search for "Power BI download" in your internet browser, or click here for a free download. Explain what effect the depreciation policy change will have on the income statement and the balance sheet. How many assets have been fully depreciated already but are still in use? What options does the university have in accounting for these assets? On a go-forward basis, what can be considered for categories that have a high percentage of assets still being used.
Akash M.
Flightline is an airline which treats its aircraft as complex non-current assets. The cost and other details of one of its aircraft are: $120,000 estimated life Exterior structure - purchase date 1 April 2009, $25,000 Interior cabin fittings - replaced 1 April 2019, $18,000 Engines (2 at $9 million each) - replaced 1 April 2019, 36,000 flying hours. No residual values are attributed to any of the component parts. On 1 April 2022, the aircraft log showed it had flown 10,800 hours since 1 April 2019. In the year ended 31 March 2023, the aircraft flew for 1,200 hours for the six months to 30 September 2022 and a further 1,000 hours in the six months to 31 March 2023. On 1 October 2022, 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 a cost of $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 airfares on this aircraft. Required: Calculate the charges to be reported in the statement of profit or loss and other comprehensive income in respect of the aircraft for the year ended 31 March 2023 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 2022.
Anand J.
Rashmi S.
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