Homework SourseXYZcom is a startup that builds high end BBQs for the consum
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.
**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.
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.
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.
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.
**Prepare an income statement using your calculations. Show gross profit and net income. You will need the following information:
Sales were $1,375,000.00
Administrative and sales expenses $225,000.00
Interest on debt is $97,000.00
Tax paid at 30%
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 245,000
Depreciation 49,000
Accounts payable 125,000
Loans payable 361,300
Net Profit 465,500
**Prepare a trial balance using these amounts.
Submit your portfolio of work and the required explanations to your assessor.
Question requirements:
- 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.
- Show the general journal transactions for July.
- Prepare a worksheet showing the appropriate journal or ledger entries to write off the debt.
- Prepare an income statement using your calculations. Show gross profit and net income.
- Prepare a trial balance using these amounts.
Solution
1. Asset Register:
Note: Asset description, category, depreciation for the period etc can also be added.
2. Depreciation:
Rate of Depreciation = 1 – [s/c]1/n
Where,
s = scrap value at the end of period ‘n’;
c = Written down value at present; and
n = useful life of the assets
therefore,
For PR001 : 1- (1/220,000)^1/10 = 29.23% (assuming scrap value to be $1 after 10 years).
For PR002 : 1- (1/25,000)^1/10 = 36.33% (assuming scrap value to be $1 after 10 years).
Depreciation for the year:
For PR001: 220,000*29.23%*9/12 (July to March for FY assumed to be April to March) = 48,221.6
For PR002: 25,000*36.33%*9/12 = 6,810.9
3. Journal entries:
a) Asset Dr. $ 245,000
To Asset Creditor A/c 245,000
b) Transaction GL7
Insurance Expense (6010) Dr. 400
Prepaid Expense Dr. (1945) 4,400
To Cash/ bank 4,800
4. The journal entry for Bad debt:
Apr - Bad debt Dr. 5,700
To provision for bad debt 5,700
July - Provision for bad debt 5,700
To JZ House and Garden 5,700
As per Chegg policy, we are to answer only initial 3-4 pats of a question with multiple parts. Therefore initial 4 parts of the question has been answered.
| S. No. | Asset ID | Asset Description | Date of purchase | Opening value | Additions | Deletions | Closing value | Accumulated Depreciation | Net Value |
|---|---|---|---|---|---|---|---|---|---|
| 1 | PR001 | BBQ stamping machine | 01.07.20xx | 220,000 | 220,000 | 48,221.6 | 171,778.4 | ||
| 2 | PR002 | BBQ Seam welder | 01.07.20xx | 25,000 | 25,000 | 6,810.9 | 18,189.1 | ||
