Answer the following with working: (iv) The management of Toyota & Sons is in the process of upgrading its fleet of motor vehicles. During March the company expects to sell an old Cresida motor vehicle that cost $500,000 at a gain of $45,000. Accumulated depreciation on this motor vehicle at that time is expected to be $340,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in March; the balance will be settled in two equal amounts in April & May of 2024.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Answer the following with working:
(iv) The management of Toyota & Sons is in the process of upgrading its fleet of motor vehicles.
During March the company expects to sell an old Cresida motor vehicle that cost $500,000
at a gain of $45,000.
expected to be $340,000. The employee will be allowed to pay a deposit equal to 60% of
the selling price in March; the balance will be settled in two equal amounts in April & May of
2024.
(v) An air conditioning unit, which is estimated to cost $300,000, will be purchased in February.
The manager has planned with the suppliers to make a cash deposit of 40% upon signing of
the agreement in February. The balance will be settled in four (4) equal monthly instalments
beginning March 2024.
(vi) A long-term bond purchased by Toyota & Sons 4 years ago, with a face value of $500,000
will mature on January 20, 2024. To meet the financial obligations of the business,
management has decided to liquidate the investment upon maturity. On that date quarterly
interest computed at a rate of 5½% per annum is also expected to be collected
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