Answer all the 6 questions :: , thanks :)

Water Airways Ltd. manufactures aircraft parts and engines and sells them to large multinational companies like Boeing and Airbus Industries. The company prepares financial statements under IFRS.

The Chief Financial officer of the company Mr. Laurel needs your help in closing the books and prepare the financial statements. He has asked his accountant Mr. Hardy to explain you the transactions for the year ended 31 March 2019. Mr. Hardy is confused as to how he should treat the transactions.

On 1 April 2018, the company began the construction of a new production line in its aircraft parts manufacturing shed.

Costs relating to the production line are as follows:

Details Amount` in million

Costs of the basic materials (list price12.5 million less 20% trade discount 10.00

Recoverable goods and services tax incurred but not included in the purchase cost 1.00

Employment costs of the construction staff for three months till 30 June 2018 1.20

Other overheads directly related to the construction 0.90

Payments to external advisors relating to the construction 0.50

Expected dismantling and restoration costs 2.00

The production line took two months to make ready for use and was brought into use on 31 May 2018.

The other overheads were incurred during the two months period ended on 31 May 2018. They included an abnormal cost of ` 0.3 million caused by a major electrical fault.

The production line is expected to have a useful economic life of eight years. After 8 years, Water Airways Ltd. is legally required to dismantle the plant in a specified manner and restore its location to an acceptable standard. The amount of ` 2 million included in the cost estimates is the amount that is expected to be incurred at the end of the useful life of the production line. The appropriate discounting rate is 5%.Thepresent value of Re. 1 payable in 8 years at a discount rate of 5% is approximately Re. 0.68.

Four years after being brought into use, the production line will require a major overhaul to ensure that it generates economic benefits for the second half of its useful life. The estimated cost of the overhaul, at current prices, is ` 3 million.

The Company computes its depreciation charge on a monthly basis. No impairment of the plant had occurred by 31 March 2019.

Answer the following questions:

You are required to assist Mr. Hardy the accountant and Mr. Laurel the CFO on account of the above transaction for the year ended 31 March 2019.Choose the best option from the given choices for each of the question or statement below. Reasoning for the answer is not required to be given.

1.Which of the following items need to be capitalized in determining the cost of Production Line?

(a)Abnormal cost of ` 0.3 million

(b)Recoverable GST of ` 1 million

(c)Initial estimate of the costs of dismantling and removing the item and restoration of site of

` 2 million

(d)Initial estimate of the costs of dismantling and removing the item and restoration of site of

` 1.36 million

2.Calculate the company's associate Water Ltd.'s cash flow from operations?

(a)` 158 million

(b)` 170 million

(c)` 174 million

(d)None of the above

3.What accounting treatment shouldbedoneinWater AirwaysLtd.'sbooksfortheyearending31 March 2019, as the customer has taken legal action against the Company on the loss of profits that has arisen as a result of the problems with the system?

(a)Nothing needs to be provided for claim instituted by the customer as the Company is suitably covered against any possible losses.

(b)Provision of `16 million should be recognised with a corresponding charge to profit or loss.

(c)Provision of `0.4 million as per best possible outcome should be recognised with a corresponding charge to profit or loss.

(d)Contingent Liability would be disclosed in the 31 March 2019 financial statements. Charge to profit or loss if any would be recognised in the period when the claim is settled.

1.Calculate the closing balance of trade receivable as at 31 March, 2019 for the transaction related to aircraft components sold to a customer on 31 December 2018.

(a)` 5,00,000

(b)` 4,71,698

(c)` 4,44,998

Determine how much amount should be recognized in the statement of financial position and statement of profit and loss for the year ended 31 March, 2019 with respect to the construction of production line.