SITUATIONAL PROBLEM 1

26. Depreciate the significant parts c/o PFRS for SMEs

27. Generally, basis for depreciations is units of production,

however, if this is not practicable, or for academic purposes,
straight line is used. The jet engines can be construed to be
depreciated once and every time they are used. As for the rest,
(i.e. body and equipment and furniture and fixtures) it cannot be
said that every time the aircraft is flown, they also depreciate;
here, units of production method is not practicable.

SITUATIONAL PROBLEM 2
28 Inv to P/L 150 29 Eqt & F 990
Prep Ins 30 Patents 120
C and CE 330 Total NCA 1110
Invty 900
AR 480
Invty 1,200
NCA-HFS 400
Total CA 3490

30 AR 1,600 31 AR, cr. 500

AP, dr. 100 AP 4,100
FVPL 500 Acc Exp 1,500
Cash 1,100 Promo Liab 600
Invty 3,000 Total CL 6700
Prep Exp 100
Total CA 6,400

32 Sales 5,000
CGS 2,800
GP 2,200
Other Income 400
Total Income 2,600
33 Expenses: Selling (workback) 700
G&A 600 1,300
Inc before taxes 1,300
Inc tax exp - 150
Inc after taxes 1,150

Year 1 error is counterbalancing no effect on year 3

RE Year 2 error is counterbalancing but the effect of
the error has not yet counterbalanced End RE of Year
2 is Beg RE of Year 3 End Invty COS NI RE
34 75,000 overstated

SITUATIONAL PROBLEM 3
 Expressly stated in the problem that the grant is not
35 taxable, hence, no deferred tax.

36 Real. Gain on Sale 1,000

Pre-tax loss -2100
Total loss (segment) -1,100
1-tax rate 0.7
Post-tax loss -770
Note: You may say the National Internal Revenue
Code does not tax losses (as a general rule).
However, this practice/law is only in our
instance/case/jurisdiction. We have to remember that
PFRS was derived from a global standard, the IFRS.

37 S C 80
P -
A -
N I
I
I
R A
A
A