inferring activities affecting fixed assets from notes to the financial statements a 558567

Inferring Activities Affecting Fixed Assets from Notes to the Financial Statements and Analyzing the Impact of Depreciation on Cash Flows Singapore Airlines reported the following information in the notes to a recent annual report (in Singapore dollars):

SINGAPORE AIRLINES
Notes to the Accounts
19. Property, Plant and Equipment (in $ millions)
The Company

Beginning
of Year

Additions

Disposals/
Transfers

End
of Year

Cost

Aircraft

18,180.10

2,257.20

1,730.30

18,707.00

Other fixed assets (summarized)

6,659.10

2,160.80

2,399.00

6,420.90

24,839.20

4,418.00

4,129.30

25,127.90

Beginning
of Year

Depreciation

Impairment
Loss

Disposals/
Transfers

End
of Year

Accumulated depreciation

Aircraft

5,634.20

1,427.10

41.4

843.9

6,258.80

Other fixed assets (summarized)

2,730.90

385.2

––

239.4

2,876.70

8,365.10

1,812.30

41.4

1,083.30

9,135.50

Singapore Airlines also reported the following cash flow details:

Cash Flow from Operating Activities (in $ millions)

Current Year

Prior Year

Profit before taxation

1,198.60

2,547.20

Adjustments for

Depreciation

1,812.30

1,488.80

Impairment loss

41.4

Surplus (gain) on disposal of fixed assets

62.7

49.1

Other adjustments (summarized)

1,544.20

414.9

Cash generated from operations

1,445.40

4,401.80

Required:

1. Reconstruct the information in Note 19 using T accounts for Fixed Assets and Accumulated Depreciation:

Fixed Assets

Accumulated Depreciation

Beg. balance

Beg. balance

Acquisitions

Disposals/transfers

Disposals/transfers

Depreciation expense

End. balance

Impairment loss

End. balance

2. Compute the amount of cash the company received for disposals and transfers for the current year. Show computations.

3. Compute the percentage of depreciation expense to cash flows from operations for the current year. What do you interpret from the result?

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