Question
Scenario: Cars for U. Jo owns and operates Cars for U, a car sales and service business in Petone. Jo drives her own private Lexus
Scenario: Cars for U.
Jo owns and operates Cars for U, a car sales and service business in Petone. Jo drives her own private Lexus SUV worth $96,000, which she uses 50% of the time for business purposes. The business owns two Toyota sedans valued at a net cost of $25,000 each that are used as courtesy cars in the service department. A business ute (net cost $5,000) has recently failed its warrant of fitness test and Jo has decided to write it off as an expense at the end of the financial year. At the year-end stocktake, Jo has estimated the value of the 20 cars parked in the sale yard at retail value of $650,000. She acquired these mostly through trade-in deals for which she paid the equivalent of $270,000. The average annual repairs, maintenance and running cost for the Lexus, courtesy cars and ute is $50,000 per vehicle. The total operating cost for the year on all the sale cars was $200,000. The value of other business assets is $180,000 and other business operating expenses $96,000.
Tasks
Use the Conceptual Framework as your main guide to help you answer the following questions.
- Provide a definition of assets. Use a specific example of an asset from Cars for U to help you with your discussion. (Indicate the paragraph numbers in the Conceptual Framework from which you have drawn your definitions.)
- Using the information given in the scenario above and the definition you discussed in (i), calculate the value of the total business assets of Cars for U.
- Provide a definition of expenses. Use a specific example of an expense from Cars for U in your discussion. (Indicate the paragraph numbers in the Conceptual Framework from which you have drawn your definitions.)
- Using the information given in the scenario and the definition you discussed in (iii), calculate the value of the total business expenses of Cars for U.
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