KA. GG Shipping is a shipping line which treats its ships as complex non-current assets. The cost and other details of one of its ships are: GHS’000 estimated life Exterior structure – purchase date 1 April 2008 120,000 Interior cabin fittings – replaced 1 April 2018 25,000 Engines (5 at GHS9 million each) – replaced 1 April 2018 45,000 No residual values are attributed to any of the component parts. 20 years 5 years 36,000 sailing hours At 1 April 2021 the ship log showed it had sailed 10,800 hours since 1 April 2018. In the year ended 31 March 2022, the ship sailed for 1,200 hours for the six months to 30 September 2021 and a further 1,000 hours in the six months to 31 March 2022. On 1 October 2021 the ship suffered a ‘collision’ an accident which damaged one of the engines beyond repair. This was replaced by a new engine with a life of 36,000 hours at cost of GHS10·8 million. Another engine was also damaged, but was repaired at a cost of GHS3 million; however, its remaining estimated life was shortened to 15,000 hours. The accident also caused cosmetic damage to the exterior of the ship which required repainting at a cost of GHS2 million. As the ship was out of service for some weeks due to the accident, GG shipping took the opportunity to upgrade its cabin facilities at a cost of GHS4·5 million. This did not increase the estimated remaining life of the cabin fittings, but the improved facilities enabled GG shipping to substantially increase the ship fares on this ship. Required:
KA.
GG Shipping is a shipping line which treats its ships as complex non-current assets. The cost and other details of one of its ships are:
GHS’000 estimated life
Exterior structure – purchase date 1 April 2008 120,000 Interior cabin fittings – replaced 1 April 2018 25,000 Engines (5 at GHS9 million each) – replaced 1 April 2018 45,000 No residual values are attributed to any of the component parts.
20 years 5 years
36,000 sailing hours
At 1 April 2021 the ship log showed it had sailed 10,800 hours since 1 April 2018. In the year ended 31 March 2022, the ship sailed for 1,200 hours for the six months to 30 September 2021 and a further 1,000 hours in the six months to 31 March 2022.
On 1 October 2021 the ship suffered a ‘collision’ an accident which damaged one of the engines beyond repair. This was replaced by a new engine with a life of 36,000 hours at cost of GHS10·8 million. Another engine was also damaged, but was repaired at a cost of GHS3 million; however, its remaining estimated life was shortened to 15,000 hours. The accident also caused cosmetic damage to the exterior of the ship which required repainting at a cost of GHS2 million. As the ship was out of service for some weeks due to the accident, GG shipping took the opportunity to upgrade its cabin facilities at a cost of GHS4·5 million. This did not increase the estimated remaining life of the cabin fittings, but the improved facilities enabled GG shipping to substantially increase the ship fares on this ship.
Required:
Calculate the charges to the income statement in respect of the ship for the year ended 31 March 2022 and its carrying amount in the
Note: the post-accident changes are deemed effective from 1 October 2021
Step by step
Solved in 4 steps
