[Solved] MGT401 Assignment 2 Fall 2020
MGT401 Assignment 2 Fall 2020 solution idea:
STUDENT ID: BC190200960
FINANCIAL ACCOUNTING -11(MGT401)
ASSIGNMENT NO # 2
ABC Company is serving the world’s top asset finance and leasing companies with smart software technology for over four decades. It has net worth of $3.98 Million dollars. It has a private air craft costing Rs. 40 million. According to air regulation requirements, it would be overhauled every four years. An overhaul costs Rs.1.6 million. The company policy has been to create a provision for depreciation of Rs. 2 million on a straight-line basis over twelve years with an annual provision of Rs.400, 000 to meet the cost of the required overhaul every four years.
- You are required to comment is there a present obligation as a result of a past obligating event for overhauling of aircraft?
Answer: No there is no present obligation.
- How company can avoid overhauling cost of aircraft?
Answer: Company can avoid overhauling by selling the aircraft.
- What would be the treatment of depreciation if no overhaul cost is recognized as a result of first question requirement?
Answer: The cost is to be capitalized and then depreciated over 4 years.