QUESTION 3:

Maritime Ltd is in the process of closing its books for the year-end. What is the impact for each of the following adjustments in each of the following:

Statement of Financial Performance

Statement of Financial Position

Cash Flow Statement

Scenario 1: Maritime Ltd purchased a new range of boat steering parts from an overseas manufacturer. The company has estimated that warranty costs will be 4% of total sales. Total sales for the current income year is $640,000.

Scenario 2: The auditors estimate the provision for long service leave should be $112,000 instead of the current provision of $150,000.

Scenario 3: Maritime Ltd decides the effective life of equipment purchased in the current year is 8 years and not the 6 years originally estimated. The difference in the depreciation expense each year is $47 000.

Scenario 4: The allowance for doubtful debts has been calculated as a percentage of total sales, being 2% of $1,000,000. However, it is decided that it would be more appropriate to calculate the allowance as a percentage of credit sales (i.e. 3% of $750,000).