Mini-bus Rentals Ltdhas a fleet of 36 mini-buses that customers can hire for self-drive tours and other transportation needs. The mini-buses costbetween $120 000 and $160 000 each and have a useful life of 12years. Tyres are replaced after 40 000 km, which is approximatelyevery two years for most vehicles in the fleet. The cost ofreplacing tyres is $2 000 per vehicle.

The bookkeeper hadbeen studying accrual accounting and though it would be a good ideato accrue maintenance expenses for the replacement of tyres. On 30June 20X6 he observed that the tyres on 9 vehicles were due forreplacement, which was expected to occur within six months afterthe reporting period.

Required

1. 1. Identify the main accounting policy issue(s) in relation to thereplacement of tyres in preparing the financial statements for theyear ended 30 June 20X6?
2. 2. escribe two principles or rules from Accounting Standards orthe Conceptual Framework that are relevant to theaccounting policy issue.
3. 3. The bookkeeper proposed to recognise a provision formaintenance and corresponding maintenance expense of $18 000 at 30June 20X6, and disclose in the notes that the tyres are expected tobe replaced within six months after the end of the reportingperiod.
   4. Describe a different policy (i.e., different from thebookkeeper’s suggestion) to account for the anticipated replacementof tyres in preparing the financial statements for the year ended30 June 20X6. Please do NOTattempt to justify the policy.
4. 4. Evaluate the bookkeeper’s policy with reference to theprinciples identified in part b), if applicable. You may also drawon other principles in your evaluation.