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Pineapple Limited is a company listed in Hong Kong. Its financial year-end is on 31 December. In the process of preparing financial statements for the year 2010, problems relating to the accounting tr
Pineapple Limited is a company listed in Hong Kong. Its financial year-end is on 31 December. In the process of preparing financial statements for the year 2010, problems relating to the accounting treatments of the following activities were identified:
Pineapple Limited leased five trucks for the transportation of Pineapples to customers. The lease term was for three years from 1 January 2010 to 31 December 2012. To facilitate the use of the trucks in a more
efficient way, Pineapple Limited had to modify the trucks to fit its needs. Therefore, one of the terms of the lease required Pineapple Limited to reinstate the trucks back to the original condition at the end of the lease. The expected restoration cost estimated by the truck manufacturer was $50,000 in total.
Pineapple Limited operates an outlet for the wholesale of Pineapples in Ho Man Tin with a policy of refunding purchased Pineapples by dissatisfied customers. Its policy of making refunds is posted at the outlet and printed on its sales receipts. Based on past experience, about 5% of the goods are returned for refund.
With reference to the relevant financial reporting and accounting standards, advise Pineapple Limited on the appropriate accounting treatments for the above activities.