Part b

Part B Pisca Ltd, a North Island furniture manufacturing business, has provided the following information to be considered in relation to the financial statements for the year ended 315 March 2020. REQUIRED Explain how the below two independent situations would affect the income statement and statement of financial position of Pisca Ltd as at the 31" March 2020 and describe what would be required to be reported and indicate where authoritative support can be gained from the financial reporting standards to support your decision. (Show necessary calculations where required) (0) Pisca Ltd purchased a Machine for $30,000 on 14 April 2018. At the time of purchase, the machine's useful lifetime was estimated as 5 years, and the expected residual value was $.5,000 and straight-line depreciation was to be used. On the purchase date, 15 April 2018, $2,000 worth of accessories were added to the machine in a way to improve the long-term efficiency of the machine. When finalizing accounts for the year ended 31" March 2020, it was identified that this $2,000 amount was written off as an expense for the year of 2018/19. (There is no change to the originally expected residual value as a result of the spending of the accessories of $2,000) [6 marks] Focus EL 1 AaBbCcDdEe AaBbCcDdEe AaBb C Aa v Caption Emphasis Heading 1 He (ii) Pisca Ltd gives a two-year warranty to customers of its products at the time of sale. Under the terms of the contract for sale, Pisca Ltd, undertakes to make good, by repair or replacement, manufacturing defects that become apparent within two years from the date of sale. The warranty scheme was started 1 of April 2019. Pisca Ltd estimates that an average of 10% of the sales will be returned for repair, replacement or manufacturing defects. The total sales made under warranty scheme for the year is $340,000. Pisca Ltd has estimated that there will be high probability (i.e. more likely than not) of some claims under the warranties. [4 marks]