Reference no: EM132949082
Question - NWR purchased a specialized game tracking and viewing vehicle which would not only hold a larger number of passengers (with a seating capacity of 30 persons) but also have greater mileage capacity (i.e increased kilometre coverage). Only one of this type of vehicle was purchased to assess whether it actually meets NWR's needs. The vehicle was purchased on 1 July 2019 at a cost of N$1,000,000.
The accounting policy for motor vehicles is to apply the cost model, and to depreciate such assets on a straight-line basis at a rate of 20% per year.
On 31 March 2020 the vehicle was involved in an accident with a herd of elephants. Due to the specialised nature of the vehicle, they were unable to determine its fair value. They estimated that they would generate the following cash flows from the use of the asset in future:
2021 2022 2023
Game drive fees 390,985 355,993 288,554
Maintenance costs -20,385 -22,378 -28,375
Operational costs -40,567 -43,058 -46,129
Net cash inflows 330,033 290,557 214,050
Present value factors for a discount rate of 10% are as follows:
Year 1 0.9090
Year 2 0.8260
Year 3 0.7510
(Round off figures to the nearest dollar (N$)).
Based on the information above, early in April 2020, management estimated that the vehicle only had a remaining useful life of 3 years and that the residual value at the end of such life would be N$100 000.
Required - Show all the journal entries to account for the events and transactions for the year ended 31 March 2021. Indicate where applicable, whether an account is an asset (A) or an expense (P/L).