On April 30, 2020, Flounder Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $93 million, with an estimated useful life of 12 years and residual value of $30 million. Flounder expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits:
On April 30, 2020, Flounder Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $93 million, with an estimated useful life of 12 years and residual value of $30 million. Flounder expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On April 30, 2020, Flounder Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $93 million, with an estimated useful life of 12 years and residual value of $30 million. Flounder expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits:
The ship’s first voyage took place on August 1, 2020. The ship sailed a total of 322,000 nautical miles in 2020. Flounder prepares financial statements in accordance with IFRS.
| Part | Cost |
Useful life | Residual value |
Pattern of benefits |
Total output (nautical miles) |
||||||||
| Engines (6) | $975,000 | per engine | 8 | years | $100,000 | per engine | Varies with activity | 7 million | |||||
| Hull | $3,900,000 | 10 | years | $503,000 | Highest in early years | 7.90 million | |||||||
| Body | $83.25 | million | 15 | years | $15.21 | million | Evenly over life of body | 12.30 million |
The ship’s first voyage took place on August 1, 2020. The ship sailed a total of 322,000 nautical miles in 2020. Flounder prepares financial statements in accordance with IFRS.
Prepare the
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepare the journal entries to record
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
| (To record depreciation on Ships Engines) | |||
|
December 31, 2020
|
|
|
|
|
|
|
|
|
| (To record depreciation on Ships Hull) | |||
|
December 31, 2020
|
|
|
|
|
|
|
|
|
| (To record depreciation on Ships Body) |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education