Question

In: Finance

XYZcom is a startup that builds high end BBQs for the consumer market. They commence operations...

XYZcom is a startup that builds high end BBQs for the consumer market. They commence operations (rather conveniently) on the first of July.

On the first of July they buy the equipment they need to produce their range of BBQs. The equipment they purchase is:

BBQ stamping machine for $220,000
BBQ Seam welder for $25,000
The effective life of the equipment is 10 years.

1) Create a table or other tool you can use as an asset register. Calculate the depreciation (diminishing value method) for the first year and include it in your asset register.

This equipment can be entered in the asset register using the ID numbers PR001 and PR002.

2)XYZcom pays $4,800 for 12 months insurance in July. Rather than recording the whole amount against July’s expenses, it wishes to show the expense equally across the periods for which it paid the premium. In other words, rather than showing a $4,800 expense for July it wishes to use prepayments to show a $400 expense in all months.Show the general journal transactions for July. The general journal transaction number is GL7, the insurance account is 6010, and the prepaid insurance 1945. The transaction is processed on the 31st July.

3) One of XYZcom’s account customers, JZ House and Garden, has gone broke, owing XYZcom $5,700. Prepare a worksheet showing the appropriate journal or ledger entries to write off the debt. Use the docket number JZ345, move the debt into bad debts in April and finalise the transactions on the 31st July. Before the write off, profit is 275,300.00. At the time of write off, theirs is the only receivable and afterwards the only bad debt.

4) XYZcom, being a startup, had a zero beginning inventory. They spent $425,000 on inventory items, receiving $12,000 for prompt payment and paying $10,000 for freight. Their closing inventory is $84,000. Determine the cost of goods sold and the closing entries for a periodic inventory.

5) Prepare a trial balance, an income statement and a balance sheet using your calculations.
You will need the following information:
Sales were $1,181,200.00
Administrative and sales expenses $225,000.00
Interest on debt is $97,000.00
At the end of the period, XYZcom has the following account balances:
Cash 550,000
Accounts receivable 117,000
Inventory 84,000
Prepaid expenses 4,800
Equipment 196,000
Depreciation 49,000
Accounts payable 125,000
Loans payable 361,300
Net Profit 465,500

I just need assistance with part 5. I need help with the trial balance, income statement and balance sheet.

Solutions

Expert Solution

PARTICULARS DEBIT CREDIT
Cash 5,50,000
Accounts receivable 1,17,000
Inventory 84,000
Prepaid expenses 4,800
Equipment 1,96,000
Depreciation 49,000
Accounts payable 1,25,000
Loans payable 3,61,300
Sales 11,81,200
Administrative and sales expenses 225,000
Interest on debt 97,000
Miscellaneous expenses 3,44,700
TOTAL 16,67,500 16,67,500

Revenue Account

sales 11,81,200
less Administrative and sales expenses (2,25,000)
Interest on debt (97,000)
depreciation (49,000)
miscellaneous expenses (BALANCING FIGURE) 3,44,700
Net profit 4,65,500

note since net profit and traces of expenses of income statement are already given we assume that some portion of expenses have not been mentioned in the question. The same has been calculated for balancing figure and has been calculated under the category of miscellaneous expenses.


BALANCE SHEET

PARTICULAR NOTE NO AMOUNT
NON CURRENT ASSETS
Equipment 1 1,96,000
CURRENT ASSETS
Cash 550,000
Accounts receivable 117,000
Inventory 84,000
Prepaid expenses 4,800
TOTAL 9,51,800
NON CURRENT LIABILITIES
Equity and reserves 2 4,65,500
CURRENT LIABILITIES
Accounts payable 125,000
Loans payable 361,300
TOTAL 9,51,800

note no-1

equipment at book value=  196,000

it is therefore clear that the equipment is inclusive of the treatment for depreciation.

note no 2

amount in reserves Net Profit 465,500

less- depreciation 49,000

= 4,16,500


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