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You and the board of directors have decided to implement a vehicle replacement program. In this program the
board has agreed to replace the organization’s vehicles every 7 years. The board suggests that each vehicle
should be purchased with a combination of cash from operations and low-interest loans. Your accountant has
suggested that the organization use the sum-of-the years depreciation method on each subsequent new
vehicle purchase.
Questions
- How would you prepare for the implementation of the program knowing that the first vehicle will be replaced
in 2 years and that each vehicle will be replaced every 3 years after that?
2.What is your understanding of the Generally Accepted Accounting Principles? - Why should an organization’s finances be audited by an objective professional?
- What is the purpose of having an inventory control program?
- What methods do organizations use for recognizing depreciation?
Sample Solution
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