Question

Black Ltd provides a range of cleaning services to commercial clients, including office cleaning. In January 20X2, Black Ltd agreed to purchase a motor vehicle from Dave's Dealership for $45,000 all inclusive. The vehicle would be used by cleaning staff to drive to and from cleaning jobs. Black Ltd took delivery of the vehicle on 1 March 20X2 and paid for it with cash.

Required:

Write the journal entry that would be processed by Black Ltd on 1 March 20X2 to recognise the purchase of the Motor Vehicle.

Apply your knowledge of the Conceptual Frameworks definition and recognition criteria to the facts of the case and explain (using your own words) why the element you have identified in the debit side of the journal entry in your answer to part 1 of this question would be recognised in Black Ltd's financial statements. Include references from the Conceptual Framework to support your answer where necessary.