Possoes Ltd acquired an aeroplane in 2022 for $75 million. Possoes does not revalue its assets, but

Question:

Possoes Ltd acquired an aeroplane in 2022 for $75 million. Possoes does not revalue its assets, but instead measures its aeroplanes at cost less accumulated depreciation. If the cost of the same type of aeroplane increases to $110 million over the next three years, and assuming that the organisation distributes all of its profits to shareholders (in the form of dividends), then does the practice of basing depreciation on historical cost create any possible problems for the organisation? If, by contrast, the organisation periodically revalues its assets to fair value, would this have acted to alleviate such problems?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: