Skybird Airlines is an airline which treats its aircraft as complex non-current assets. The cost and other details of one of its aircraft are: GHC'000 Estimated life Exterior structure – purchase date 1st April, 1995 120,000 20 years Interior cabin fittings – replaced 1st April 2005 25,000 5 years Engines (2 at GHC9 million each) – replaced 1st April, 2005 18,000 36,000 flying hours No residual values are attributed to any of the component parts. At 1 April 2008 the aircraft log showed it had flown 10,800 hours since 1 April 2005. In the year ended 31st March, 2009, the aircraft flew for 1,200 hours for the six months to 30th September, 2008 and a further 1,000 hours in the six months to 31st March, 2009. On 1 October 2008 the aircraft suffered a 'bird strike' 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 GHC10·8 million. The other engine was also damaged, but was repaired at a cost of GHC3 million; however, its remaining estimated life was shortened to 15,000 hours. The accident also caused cosmetic damage to the exterior of the aircraft which required repainting at a cost of GHC2 million. As the aircraft was out of service for some weeks due to the accident, Skybird Airlines took the opportunity to upgrade its cabin facilities at a cost of GHC4·5 million. This did not increase the estimated remaining life of the cabin fittings, but the improved facilities enabled Skybird Airlines to substantially increase the air fares on this aircraft. Required: Calculate the charges to the income statement in respect of the aircraft for the year ended 31 March 2009 and its carrying amount in the statement of financial position as at that date. Note: the post-accident changes are deemed effective from 1 October 2008

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Skybird Airlines is an airline which treats its aircraft as complex non-current assets. The cost and other details of one of its aircraft are: GHC'000 Estimated life Exterior structure – purchase date 1st April, 1995 120,000 20 years Interior cabin fittings – replaced 1st April 2005 25,000 5 years Engines (2 at GHC9 million each) – replaced 1st April, 2005 18,000 36,000 flying hours No residual values are attributed to any of the component parts. At 1 April 2008 the aircraft log showed it had flown 10,800 hours since 1 April 2005. In the year ended 31st March, 2009, the aircraft flew for 1,200 hours for the six months to 30th September, 2008 and a further 1,000 hours in the six months to 31st March, 2009. On 1 October 2008 the aircraft suffered a 'bird strike' 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 GHC10·8 million. The other engine was also damaged, but was repaired at a cost of GHC3 million; however, its remaining estimated life was shortened to 15,000 hours. The accident also caused cosmetic damage to the exterior of the aircraft which required repainting at a cost of GHC2 million. As the aircraft was out of service for some weeks due to the accident, Skybird Airlines took the opportunity to upgrade its cabin facilities at a cost of GHC4·5 million. This did not increase the estimated remaining life of the cabin fittings, but the improved facilities enabled Skybird Airlines to substantially increase the air fares on this aircraft. Required: Calculate the charges to the income statement in respect of the aircraft for the year ended 31 March 2009 and its carrying amount in the statement of financial position as at that date. Note: the post-accident changes are deemed effective from 1 October 2008

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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