Advanced Financial Accounting

QUESTION 4 Antillean Airlines bought an X200 aircraft on January 1, 1997 for twenty million dollars (820m) The aircraft at the date of acquisition was deemed to have a useful life of twenty (20) years and an estimated residual value of one million dollars (Sim. At the beginning of 2007 the aircraft was revalued by S1Om after being fitted with new engines. The useful life of the aircraft was increased by five (5) years and the residual value increased to $2.5m. It is now January 1, 2017, the start of the 21"yeat of its operation. The manufacturers of the siteraft have replaced the X200 with a new technologically advanced model, the DR201E in December 2017. At December 31, 2017, Antillean Airlines believes the siteraft in impaired. The following information is available: 1. Fair value of the aircraft is Som (cost to sell 0.8 million) 2. Future cash flows and the appropriate 12% discount factors associated with the aircraft are as follows: DISCOUNT YEAR FACTOR 2012 0.8929 2018 0.7972 2019 0.7118 0.6355 2021 0.5674 S000 900 R50 720 2020 1.100 700 a) b) Required: Calculate the carrying value of the asset (aircraft) at January 1 2017. (4 marks) Compute the recoverable amount of the aircraft at December 31 2017 and determine whether the asset is impaired. (5 marks As it relates to the aircraft, show the Statement of Financial Position extract as 31 December 2017 and the Statement of Profit or Loss and Other Comprehensive Income extract for the year ended 31 December 2017. (5 marks) c) d) In the year 2012 a fair value gain of Sm is reported on an asset (Property, Plant and Equipment), the following year, 2013 an impairment les of S3m is suffered on the same asset. Discuss the accounting treatment required. (4 marks)