If A New Model Of A Second Hand Car Case Study
Depreciation is an expense that indicates the decrease in value of a fixed asset over a period of time. The cost price minus the asset’s depreciation calculates the carrying value of the asset.
Depreciation is accounted for in order to know the carrying value of a vehicle and to help when determining the price at which the business should sell the vehicle.
2. F
3. Besides model, describe FOUR other factors that influence the price of a second hand car.
- The price may be determined by the kilometers travelled by the car.
- The price may be affected if the car was in an accident (ie. Physical condition).
- The price could be lowered if the car is old.
- The price may be affected if a competitor is selling the same second …show more content…
If a new model of a particular car comes out, how does it affect the price of the previous model and what effect does this have on the second-hand market?
When a newer model of a particular car comes out, older models will be in less demand and thus the price of the older model will drop. The second-hand market is now affected as now any second-hand cars which are that old model type will decrease in value. The second-hand market would thus lose money. However, with the older model being cheaper, it may attract more customers who want a cheaper option for a car.
5. How does VAT work on the sale of a second-hand car?
If the dealership is registered for VAT, the transaction selling the vehicle will be subject to VAT. The VAT that is paid when selling a vehicle is output VAT. However, if an individual sells a second-hand car to another individual, no VAT will be charged.
6. Are there guidelines for all dealers when pricing second-hand cars?
Yes, there is a pricing guide. It is called the M&M guide. Dealers also take into account the physical condition and kilometers driven to price the second-hand car.
7. List some things a person or business can do to influence the price they can get for a …show more content…
What is an asset register and what details does it include?
An asset register is a statement which outlines the business’ owned fixed assets. The register includes the cost price, accumulated depreciation and carrying value of the fixed assets owned by the business.
2. Research how the business decides what vehicles to buy. On what are their decisions based?
The vehicle bought is usually decided upon due to its purpose in the business. For example, a business that transports metal materials which are heavy would generally need trucks that are new and reliable. Businesses would generally buy new vehicles (and mainly newer models) from well-known makes in order to ensure the quality of the vehicle. Some companies would match the vehicles colour with the business’ colour.
3. Find out what method and rate of depreciation is used by the business and why?
Businesses generally use 20% p.a. as recommended by SARS. This rate is used considering the average life-span of a vehicle. The business that I interviewed uses 20% p.a. on the fixed installment method.
4. Determine how the business decides when to sell or trade-in their
Depreciation is accounted for in order to know the carrying value of a vehicle and to help when determining the price at which the business should sell the vehicle.
2. F
3. Besides model, describe FOUR other factors that influence the price of a second hand car.
- The price may be determined by the kilometers travelled by the car.
- The price may be affected if the car was in an accident (ie. Physical condition).
- The price could be lowered if the car is old.
- The price may be affected if a competitor is selling the same second …show more content…
If a new model of a particular car comes out, how does it affect the price of the previous model and what effect does this have on the second-hand market?
When a newer model of a particular car comes out, older models will be in less demand and thus the price of the older model will drop. The second-hand market is now affected as now any second-hand cars which are that old model type will decrease in value. The second-hand market would thus lose money. However, with the older model being cheaper, it may attract more customers who want a cheaper option for a car.
5. How does VAT work on the sale of a second-hand car?
If the dealership is registered for VAT, the transaction selling the vehicle will be subject to VAT. The VAT that is paid when selling a vehicle is output VAT. However, if an individual sells a second-hand car to another individual, no VAT will be charged.
6. Are there guidelines for all dealers when pricing second-hand cars?
Yes, there is a pricing guide. It is called the M&M guide. Dealers also take into account the physical condition and kilometers driven to price the second-hand car.
7. List some things a person or business can do to influence the price they can get for a …show more content…
What is an asset register and what details does it include?
An asset register is a statement which outlines the business’ owned fixed assets. The register includes the cost price, accumulated depreciation and carrying value of the fixed assets owned by the business.
2. Research how the business decides what vehicles to buy. On what are their decisions based?
The vehicle bought is usually decided upon due to its purpose in the business. For example, a business that transports metal materials which are heavy would generally need trucks that are new and reliable. Businesses would generally buy new vehicles (and mainly newer models) from well-known makes in order to ensure the quality of the vehicle. Some companies would match the vehicles colour with the business’ colour.
3. Find out what method and rate of depreciation is used by the business and why?
Businesses generally use 20% p.a. as recommended by SARS. This rate is used considering the average life-span of a vehicle. The business that I interviewed uses 20% p.a. on the fixed installment method.
4. Determine how the business decides when to sell or trade-in their