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Surat Limited paid cash to acquire on aircraft on January 1, 2017, at a cost of...

Surat Limited paid cash to acquire on aircraft on January 1, 2017, at a cost of 33,160,000 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 11,400,000 50 years
Engines 16,600,000 40 years
Interior 5,160,000 30 years
33,160,000

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.

(1) Record the entry for the cost of aircraft on its purchase as per IFRS

(2) Record the entry for the depreciation of aircraft as per IFRS

(3) Record the entry for the cost of aircraft on its purchase as per U.S. GAAP

(4) Record the entry for the depreciation of aircraft as per U.S. GAAP

(5) Record the entry for the depreciation of aircraft as per IFRS

(6) Record the entry for the depreciation of aircraft as per 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.

(1) Record the conversion entry needed for 12/31/17

(2) Record the conversion entry needed for 12/31/18

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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