A company acquires new taxi fleets on 1April 2006 with
intention to provide services during the World Cup period
and thereafter dispose the taxis .The World Cup runs for
three months to 30 June 2006.The company's year end is 30
June 2006.how do you account for taxis at initial
recognition .
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Answer / Asha Verma
For initial recognition of the taxi fleets, the company should record the cost of the taxis as an asset on their balance sheet. The cost could be calculated as the purchase price plus any additional costs such as taxes, freight, and insurance. The taxis would then be depreciated over their useful life, which in this case is expected to last until the end of the World Cup period.
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