ACCOUNTING AND NO MISSING DATA

CORRECT ANSWER IS REQUIRED

Flywing Airways Ltd. is a company which manufactures aircraft parts and engines and sells them to large multinational companies like Boeing and Airbus Industries. The company prepares financial statements under International Financial Reporting Standards. The Chief Financial officer of the company Mr. Laurel needs your help in closing the books and prepare the financial statements. He has asked his accountant Mr. Hardy to explain you the transactions for the year ended 31 March 2019. Mr. Hardy is confused as to how he should treat the transactions. On 1 April 2018, the company began the construction of a new production line in its aircraft parts manufacturing shed. Costs relating to the production line are as follows: Detalls Amount in million Costs of the basic materials (list price12.5 million less 20% trade discount) 10.00 Recoverable goods and services tax incurred but not included in the purchase cost 1.00 Employment costs of the construction staff for three months til 30 June 2018 1.20 Other overheads directly related to the construction 0.90 Payments to external advisors relating to the construction 0.50 Expected dismantling and restoration costs 2.00 The production line took two months to make ready for use and was brought into use on 31 May 2018. The other overheads were incurred during the two months period ended on 31 May 2018. They included an abnormal cost of 0.3 million caused by a major electrical fault The production line is expected to have a useful economic life of eight years. After 8 years, Flywing Airways Ltd. is legally required to dismantle the plant in a specified manner and restore its location to an acceptable standard. The amount of 2 million included in the cost estimates is the amount that is expected to be incurred at the end of the useful life of the production line. The appropriate discounting rate is 5%. The present value of Re 1 payable in 8 years at a count rate of 5% is approximately Re. 0.68. Four years after being brought into use the production line will require a major overhaul to ensure that it generates economic benefits for the second half of its useful life. The estimated cost of the overhaul, at current prices, is 3 million The Company computes its depreciation charge on a monthly basis. No impairment of the plant had occurred by 31 March 2019 On 1 July 2018, Flywing Airways Lid. acquired 75% of the equity shares of Bolton Lid. and gained control of Bolton Ltd. Bolton Ltd. has 12 million equity shares in issue. Details of the purchase consideration are as follows: On 1 July 2018, Flywing Airways Ltd. Issued two shares for every three shares acquired in Bolton Lid. On 1 July 2018, the market value of an equity share in Flywing Airways Ltd. was 6-50 and the market value of an equity share in Bolton Ltd. was 6-00. On 30 June 2019, Flywing Airways Ltd. will make a cash payment of 7-15 million to the former shareholders of Bolton Ltd. who sold their shares to Flywing Airways Ltd. on 1 July 2018. On 1 July 2018, Flywing Airways Ltd. would have needed to pay interest at an annual rate of 10% on borrowings. On 30 June 2020, Flywing Airways Ltd. may make a cash payment of 30 million to the former shareholders of Bolton Ltd. who sold their shares to Flywing Airways on 1 July 2018. This payment is contingent upon the revenues of Flywing Airways growing by 15% over the two-year period from 1 July 2018 to 30 June 2020. On 1 July 2018, the fair value of this contingent consideration was 25 million. On 31 March 2019, the fair value of the contingent consideration was 22 million. On 1 July 2018, the carrying values of the identifiable net assets of Bolton Ltd. totalled 60 million. On 1 July 2018, the fair values of these net assets totalled 70 million. The rate of deferred tax to apply to temporary differences is 20%. During the nine months ended on 31 March 2019, Bolton Ltd. had a poorer than expected operating performance. Therefore, on 31 March 2019 it was necessary for Flywing Airways Ltd. to recognize an impairment of goodwill arising on acquisition of Bolton Ltd, amounting to 10% of its total computed value. During the year ended 31 March 2019, Flywing Airways Ltd, provided consultancy services to a customer regarding the installation of a new production system related aircraft parts. The system has caused the customer considerable problems, so the customer has taken legal action against the Company on the loss of profits that has arisen as a result of the problems with the system. The customer has claimed damages to the tune of 1.6 million The legal department of Flywing Airways Lid. considers that there is a 25% chance the claim can be successfully defended The legal department further stated that they are reasonably confident the Company is covered by insurance against these types of loss. The legal department planned to raise a claim as soon as the outcome of the case is confirmed Mr. Hardy feels nothing needs to be provided for this claim as the Company is suitably covered against any possible losses Flywing Airways Ltd, delivered a quantity of aircraft components to a customer on 31 December 2018. The invoiced amount was 500,000. The Company expected to receive payment on 28 February 2019 However, no cash was received till 31 March 2019. On 30 April 2019, the credit control department informed that the customer has major cash flow problems as a result of the failure of one of its projects, sometime in February 2019 They have agreed to allow the customer to settle the debt until 31 March 2020, by which time the customer is confident that the cash flow problems will be resolved Though Flywing Airways Ltd currently expects that an annual interest of 6% (i e effective interest rate) can be received against any money lent out, yet it allowed this customer an interest free payment period Flywing Airways Ltd also has an Associate company, Flyjet Limited Following are the information of Flyjet Limited for the year ended 31 March 2019 Particulars Amount (million) Net Income after taxes 120 Decrease in accounts receivables 20 Depreciation 25 10 7 Increase in inventory Increase in accounts payable Decrease in wages payable Tax charge for the year (including deferred tax liabilities) Profit from sale of land 5 15 2 Calculate the company's associate Flyjet Ltd.'s cash flow from operations? (a) 158 million (b) * 170 million (c) 174 million (d) None of the above