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ASSIGNMENT ACCOUNTING Aviator Airways Ltd and Eagle Airlines Ltd Solutions to required facts (1) Well there is a vast amount of difference in the depreciation accounting policies of Aviator and Eagle for the year ended 30 June 2012 and 31 March 2012. The two following air lines have adopted different policies in making their business. In case of the Aviator, the total assets of the company are higher than the total assets of the Eagle airlines. In case of the Aviator Airlines, the company has grown well enough and produced enough revenue but when it comes to the Eagle, they have emphasis on the companys reputation. They have maintained good amount of revenue by adopting good practices and adopted a balanced strategy. It has been observed that the depreciation value has been much affected by the aircraft engines and spare parts. There is a great difference in the depreciation as the parts of the engine have created a gap. In case of the Aviator Airlines, the total value of the air craft and engines costs 13358.9 million dollars that has accumulated depreciation amount of 3989.8 million dollars with the written down amount of 9369.8 million dollars. The net air craft spare costs the

750.7 million dollars with its written down values of 383.9 million dollars and 366.8 million dollars. By looking at the statistics, one can note that there has been a drastic difference in the total assets of the air lines. Eagle airlines made a record profit of around 896 million dollars in the month of March 2012. The net profit of the Aviator Airlines was recorded less than the Eagles Airlines that show a difference in the values of the depreciation values. When there is wear and tear in the spare parts then so as it affects the values of the depreciation and the planned finances of the Airlines.

(2) On the basis of financial information provided in the case study, one can have the required data. The depreciation expenses expense for the 2012 financial year for both Aviator and Eagle with respect to aircraft and engines and spare parts will be calculated with a comparative analysis for a better understanding. Depreciation of engines and spare parts

= (750.7-383.9)/5 =73.360 The above mentioned are the values for the Aviator Airlines. = (1306.1-595.2)/5 = 142.18 The above mentioned are the calculations for the Eagle Airlines.

Depreciation of expenses of useful life and residual life

The calculation is as follows for both of the respective airlines. Declining Rate = 1/5 x 2 = 1/5 x 2 = 40% Balance rate depreciation = 73.360.6*40% =29.344 For Eagle Airlines: = 142.18*40% = 56.8 Comparative analysis

On the basis of the calculations made for both of the accounts for Airlines, one can conclude that the eagle airlines are doing a fair good job as compared to the Aviator Airlines. They have maintained their depreciation rates and the total value of assets is higher.

(3) Review of the annual report of national aircraft company in Australian Stock Exchange Alliance Aviation Service Limited is one of the companies operating in Australia that are quite profitable in their business. Below is a brief description of the companys facts and figures. Ending year 2012 Revenue EBITDA Finance Costs Tax Profit after Actual Statutory 184 28.6 7.6 1.4 19.6 Adjusted Pro Forma 3.4 1.9 2.9 6.1 0.4 Forecast Pro Forma 184 19 60 25 19.1 47 30 25.6 7.2 18.1 Adjustments

tax

Business Plan

Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Non-cash Assets from Start-up Cash Requirements from Start-up Cash Balance on Starting Date Total Assets Total Planned Investment Loss at Start-up Start-up Expenses Total Capital Total Capital and Liabilities Total Funding

$9000 $21,100 $22,000 $2,300 $18,800 $18,800 $21,100 $22,000 $9000 $21,100 $21,100 $22,000

Break-even Analysis

Monthly Revenue Break-even Assumptions/Suppositions Average Percent Variable Cost Estimated Monthly Fixed Cost

$8,518 8% $7,837

Pro Forma Profit and Loss

Year 1 Year 3 Sales Direct Cost of Sales $11,767 Total Cost of Sales $11,767 Gross Margin Gross Margin % Expenses Payroll Sales and Marketing $1,200 Depreciation Insurance $1,800 Rent Payroll Taxes $10,800 Other $0 Total Operating Expenses $94,044 Profit Before Interest and Taxes$14,104 Net Profit $14,104 Net Profit/Sales 16.23% $0 $86,891 $6,951 $6,951 $79,940 92.00% $63,120 $1,200 $456 $1,800 $18,000 $9,468

Year 2

$128,000

$147,090 $10,240 $10,240

$117,760 $135,323 92.00% 92.00% $67,000 $72,000 $1,200 $456

$456 $1,800 $18,000

$18,000 $10,050

$0 $98,506 $104,256 $19,254 $31,067 $13,478 $21,747 10.53% 14.78%

Pro Forma Cash Flow Year 1 Year 3 Year 2

Cash Received Cash from Operations Cash Sales $86,891 Subtotal Cash from Operations$86,891 Additional Cash Received

$128,000 $147,090 $128,000 $147,090

Subtotal Cash Received $86,891 Expenditures Year 1

$128,000

$147,090 Year 2

Year 3 Expenditures from Operations Cash Spending $63,120 Bill Payments $34,142 Subtotal Spent on Operations $97,262 Additional Cash Spent Subtotal Cash Spent $97,262 Net Cash Flow $10,371 Cash Balance $8,429 $45,635

$67,000 $72,000 $46,475 $52,409 $113,475 $124,409 $113,475 $124,409 $14,525 $22,681 $22,954

The calculations could be made as: Break even sales = fixed cost + variable cost

For calculating the profit of the company it is expected to calculate by the following formula: Profit = (Sales Variable expenses) Fixed expenses

For the total sales of the company, the below equation can give us the accurate values: Sales = Variable expenses + Fixed expenses + Profit

Revenue for year 2012 Expenses Flight and operations costs (102,466) Engineering and maintenance costs (22,941) Selling and marketing expenses (2,098)

Office and general administration costs (7,762) IPO costs (3,354) Finance costs (5,411) Depreciation (12,300) Profit before income tax 21,002 30,423 Income tax benefit / (expense) (9,616) Profit for the year 20,807 Profit attributable to: Owners of Alliance Aviation Services Limited 20,807 Earnings per share based on earnings attributable to the ordinary equity holders of the company 32 Cents per share

Basic earnings per share 24.38 Diluted earnings per share 24.34

Some of the Significant Steps Adopted Conceded charge possessions and liabilities are counterbalanced when there is a lawfully enforceable right to balance current charge holdings and liabilities and when the conceded charge equalizes identify with the same levy power. Current charge holdings and charge liabilities are counterbalance where the element has a legitimately enforceable right to balance and means either to settle on a net foundation, or to understand the stake and settle the risk at the same time.

The company named as Alliance Aviation Limited and its whollyclaimed Australian regulated elements have actualized the assessment union enactment. As a result, these substances are saddled as a solitary element and the conceded assessment holdings and liabilities of these substances are situated off in the solidified budgetary comments. Current and conceded charge is recognized in benefit or misfortune, with the exception of to the degree that it identifies with things recognized in other complete wages or straightforwardly in value. Hence, the assessment is additionally recognized in other extensive earnings or straightforwardly in value, individually. Rents of property, plant and supplies where the assembly, as tenant, has generously all the dangers and remunerates of possession are arranged as fund leases. Account leases are capitalized at the lease's initiation at the reasonable worth of the rented property or, if bring down, the present quality of the base lease installments. The comparing rental commitments, net of fund charges, are incorporated in other fleeting and enduring payables. Every lease installment is allotted between the risk and money cost. The fund expense is charged to the benefit or misfortune over the lease period in order to process a consistent intermittent rate of investment on the remaining equalize of the risk for every period. The property, plant and supplies gained under fund leases is deteriorated over the holding's handy life or over the shorter of the possession's helpful life and the lease term if there is no sensible assurance that the gathering will get possession at the finish of the lease term. Rents in which a noteworthy parcel of the dangers and remunerates of possession are not exchanged to the gathering as resident are arranged as working rents Installments made under working rents are charged to benefit or misfortune on a straight-line groundwork over the time of the lease. Holdings are tried for disability at whatever point occasions or updates in circumstances demonstrate

that the convey measure may not be recoverable. A debilitation misfortune is recognized for the sum by which the holdings convey measure surpasses its recoverable sum. The recoverable sum is the higher of a holding's reasonable quality less expenses to offer and worth being used. For the reasons of surveying disability, stakes are amassed at the least levels for which there are independently identifiable money inflows which are to a great extent autonomous of the money inflows from different holdings or aggregations of possessions (4) Significance of depreciation policies There is an ample of advantages of the depreciation policies that are adopted by the organization. The best feature is in the cut down of irrelevant expenses that are made by the management. When there is a cut in the extra expenses in the company then automatically there is a sustained graph of the revenue generation at the end of the year. It carries and creates a big impact on the company as the company is relying on the performance and decisions of the management, and if there are some wrong steps taken by the management then obviously at the end of the year, company would suffer a big loss. The introduce on which the thought of devaluation is based is that the possession might as well yearly be carried to the worth that it might get in the business provided that it were to be sold today. Along these lines the organization has the ability to ward off misfortunes in the genuine occasion of a deal.

For instance, wouldn't it be great if we could say a possession was purchased for twelve thousand dollars and was esteemed by the

organization at that cost until the holding quit working five years later. There are two fundamental profits of deteriorating possessions. To begin with, a faultless examination permits the advantage for be recorded in the organization's budgetary explanations at the worth that it might order in the business sector assuming that it were to be sold. Along these lines, the organization does not acquire a misfortune. Besides, the organization does not need to pay assesses on procurements for devaluation. The cash spared might be either put back in the organization for extension purposes or dispersed to value holders as shares.

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