3 Item 1 Item 1 3 points Surat Limited paid cash to acquire an aircraft on Janua
ID: 2580297 • Letter: 3
Question
3 Item 1 Item 1 3 points Surat Limited paid cash to acquire an aircraft on January 1, 2017, at a cost of 33,430,000 rupees. The aircraft has an estimated useful life of 50 years and no salvage value. The company has determined that the aircraft is composed of three significant components with the following original costs (in rupees) and estimated useful lives: Component Cost Useful Life Fuselage 11,600,000 50 years Engines 16,700,000 40 years Interior 5,130,000 30 years 33,430,000 The U.S. parent of Surat does not depreciate assets on a component basis, but instead depreciates assets over their estimated useful life as a whole. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: a. Prepare journal entries for this aircraft for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. b. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.
Explanation / Answer
a) 1) Surat Limited
Journal Entries (Amount in $)
a) 2) Surat Limited
Journal Entries (Amount in $)
Depreciation on Fuselage Dr.
(11,600,000/50 years)
Depreciation on Engine Dr.
(16,700,000/40 years)
Depreciation on Interior Dr.
(5,130,000/30 years)
2) Journal entries for converting IFRS balances to US GAAP
Credit
Date Particulars Debit Credit Jan 1,2017 Aircraft Dr. 33,430,000 To Cash 33,430,000 Dec 31,2017 and Dec 31,2018 Depreciation expense Dr. 668,600 To Accumulated Depreciation 668,600 (To record depreciation expense of $668,600 (33,430,000/50) Dec 31,2017 and Dec 31,2018 Income statement Dr. 668,600 To Depreciation expense 668,600Related Questions
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