On 1 January 2011, Marine Limited took delivery of its newly constructed luxury ocean-liner (African Queen...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On 1 January 2011, Marine Limited took delivery of its newly constructed luxury ocean-liner (African Queen II) at a cost of R5 000 million. Marine Limited has operated numerous luxury ocean-liners across the seven seas of the world for over fifty years and in order to maintain its reputation as the most elite of ocean-liners it replaces its ocean-liners every ten years even though the economic life of ocean-liners is proven to be approximately fifty years. The residual value of African Queen II was appropriately determined to be: R4 000 million on 31 December 2016, 2017 and 2018; R4 850 million on 31 December 2019. On 31 December 2020, because of declining demand for ocean-liner services resulting from the extended global economic downturn arising from world Covid 19 Pandemic, Marine Limited decided that it would continue to use African Queen II for a further ten years (ie a total useful life of 15 years). On 31 December 2020, the fair value of an equivalent ocean-liner that is: 5 years old is R3 200 million, 10 years old is R3 000 million, and 15 years old is R2 000 million. If Marine Limited was to sell the African Queen II on 31 December 2020, selling expenses of R320 million would be incurred. At 31 December 2020, Marine Limited appropriately estimated the expected future net operating cash flows of keeping the African Queen II in use to be an inflow of R500 million per annum and that the African Queen II will realise upon disposal R2 500 million (net of disposal costs) ten years hence (ie on the expected date of disposal). An appropriate discount rate is 9% per annum. Required: Discuss how Marine Limited should account for the African Queen II in its 31 December 20.5 company financial statements. Your answer should be limited to the recognition and measurement issues only (ie ignore presentation and disclosure). On 1 January 2011, Marine Limited took delivery of its newly constructed luxury ocean-liner (African Queen II) at a cost of R5 000 million. Marine Limited has operated numerous luxury ocean-liners across the seven seas of the world for over fifty years and in order to maintain its reputation as the most elite of ocean-liners it replaces its ocean-liners every ten years even though the economic life of ocean-liners is proven to be approximately fifty years. The residual value of African Queen II was appropriately determined to be: R4 000 million on 31 December 2016, 2017 and 2018; R4 850 million on 31 December 2019. On 31 December 2020, because of declining demand for ocean-liner services resulting from the extended global economic downturn arising from world Covid 19 Pandemic, Marine Limited decided that it would continue to use African Queen II for a further ten years (ie a total useful life of 15 years). On 31 December 2020, the fair value of an equivalent ocean-liner that is: 5 years old is R3 200 million, 10 years old is R3 000 million, and 15 years old is R2 000 million. If Marine Limited was to sell the African Queen II on 31 December 2020, selling expenses of R320 million would be incurred. At 31 December 2020, Marine Limited appropriately estimated the expected future net operating cash flows of keeping the African Queen II in use to be an inflow of R500 million per annum and that the African Queen II will realise upon disposal R2 500 million (net of disposal costs) ten years hence (ie on the expected date of disposal). An appropriate discount rate is 9% per annum. Required: Discuss how Marine Limited should account for the African Queen II in its 31 December 20.5 company financial statements. Your answer should be limited to the recognition and measurement issues only (ie ignore presentation and disclosure).
Expert Answer:
Answer rating: 100% (QA)
Marine Limited should account for the African Queen II in its 31 December 2020 company financial sta... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Database administration simply means managing the records in a database management system (DBMS), which requires a working knowledge of the tables and relationships in the DBMS. A major function of...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Read the case study and answer the question below with a one page response. What does a SWOT analysis reveal about the overall attractiveness of Under Armours situation? Founded in 1996 by former...
-
Wolverine World Wide, Inc., manufactures military, work, sport, and casual footwear and leather accessories under a variety of brand names, such as Hush Puppies, Wolverine, Merrell, Stride Rite, and...
-
Reaction of benzaldehyde with 1, 2-octanediol in benzene containing a small amount of p-toluenesulfonic acid yields almost equal quantities of two products in a combined yield of 94%. Both products...
-
Define each of the following terms: a. Proxy; proxy fight; preemptive right; classified stock; founders' shares b. Free cash flow valuation model, value of operations; non-operating assets c....
-
A tension test was performed on a magnesium alloy specimen having a diameter 0.5 in. and gauge length 2 in. The resulting stressstrain diagram is shown in the figure. Determine the approximate...
-
On a hot summer day the temperature is 35C, barometric pressure is 103 kPa, and the relative humidity is 90%. An air conditioner draws in outside air, cools it to 20C, and delivers it at a rate of...
-
Need help expanding the questions below. State of Ohio's position on the ban? What legislation if any supports or opposes the ban and or tries to protect smokers in the workplace? How smoking in...
-
Two graduate students are engaged to one another, and both are working on their master's theses-Michael in music education and Kristen in political science. Because both have incomes that are tied to...
-
A single-phase rectifier has a resistive load of 252. Determine the average current and peak reverse voltage across each of the diodes for (a) a bridge rectifier with an ac source of 120 V rms and 60...
-
Foreign Direct Investment and Cross-Border Acquisitions Project Description: While making a decision about investing abroad a company has to consider a wide range of factors comprising the investment...
-
What organizational capabilities are required to support the launch of "Command Products"?
-
Discuss how positive psychology can be used for the greater good. Some assert that positive psychology represents the narcissistic tendencies of our culture. Explain how positive psychology can be...
-
Explore leverage as it related to the financial crisis of 2008/2009 and share what you learned?
-
QUESTION 4 We can make a uniform Electric field by spreading opposite charges on large-Area metal plates that aren't very far apart, like an Oreo. Suppose the two plates are 0.200[m]x0.200[m], set...
-
1. A research scientist devised an apparatus to irradiate mice for radiobiology experiments which was based on the use of a Am-241 source. An experiment revealed that a dose of 10 Gy was required to...
-
Kims Konstructions has assembled the following data for a proposed straw-reinforced brick maker (SRBM): SRBM Cost: $26,000 Life: 5 years Revenue (p.a.) $11,000 Operating Expenses (p.a.) $3,000...
-
You have been asked by a client to review the records of Roberts Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have...
-
Why is the distinction between paid-in capital and retained earnings important?
-
The Coca-Cola Company and PepsiCo, Inc. Instructions Go to the books companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo,...
-
A membrane separator is \(3 \mathrm{~mm}\) in diameter, and the membrane permeability was estimated as \(2 \times 10^{-6} \mathrm{~m} / \mathrm{s}\). The solute being transported has a diffusivity of...
-
Develop a simple backmixed model to evaluate the performance of a gas-separation system. Here a feed gas enters a high-pressure chamber with a mole fraction of A of \(x_{\mathrm{Af}}\) and leaves...
-
Derive an expression for \(D \boldsymbol{v} / D t\) in cylindrical coordinates. Define the nabla operator in cylindrical coordinates and let it be dotted with a vector. Expand and use the chain rule,...
Study smarter with the SolutionInn App