presented D lease note Week 5 and 6 presentations are based on the information C
ID: 2522392 • Letter: P
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presented D lease note Week 5 and 6 presentations are based on the information Caitlin is a sole trader and she has kept very detailed cash records. Caitlin now feels that she needs to have accrual based records because more than half of her clients are credit customers. She supplies you with the following information for her first year of operation: CORPORATE CATERING STATEMENT OF CASH RECEIPTS AND CASH PAYMENTS FOR THE YEAR ENDED 30 JUNE 2017 CASH RECEIPTS Revenue from Customers Loan from 'Credit Union Ltd 286 000 30,000 316,000 CASH PAYMENTS Advertising Apprentice Wages Accountant's Fees Interest on Loan from Credit Union Ltd Purchase of Delivery Van Delivery Van Expenses Administration/ Utilities Purchase of Catering Equipment Purchase of Supplies Drawings 4,500 25,000 4,000 625 32,000 12,000 46,000 38,000 43,000 65,000 270,125 ADDITIONAL INFORMATION WORKSHOP 7 PRESENTATION QUESTION Please refer to details provided in Week 5 Presentation for Corporate Catering ADDITIONAL INFORMATION 6. The apprentice is paid $500 a week. He is owed two weeks wages. 7. The business has use of a motor vehicle purchased 1 January 2017, at a cost of $32, It has an expected life of 4 years and an estimated trade-in value of $4,000. Straight depreciation is used. 8. Supplies on hand 30 June 2017 were valued at $5,500 REQUIRED [a) b] el What is Depreciation'"? How is Depreciation Expense different from Accumulated Depreciation? Show the Balance Day Adjustments required to record the additional information shown in point 6,7 and 8 in a worksheet format. Explain why each adjustment is necessary Prepare an Income Statement and Balance Sheet for Corporate Catering.Explanation / Answer
Requirement a) Depreciation is a systematic decrease in the value of fixed asset due to its use or wear and tear Depreciation expense is generally for one year. While accumulated depreciation is the sum of all the year's depreciation charged so far on fixed asset. Requirement b) Balance day adjustment can be best shown by Journal entry. Amount in $ Date General Journal Debit Credit Explanations December 31, 2017 Apprentice wages expenses 1000 Though this expense is not paid but pertain to this year. Apprentice wages Payable 1000 It is called accrued expenses and needs to be accounted for To record the accrued apprentice wages payable in the accrual accounting system. December 31, 2017 Depreciation expense-Delivery Van 7000 =(32000-4000)/4 years. Accumulated depreciation-Delivery Van 7000 It implies that delivery van/car has been used to the extent of To record the depreciation expense on car. $7000 in this year and hence required to be accounted for in this year. December 31, 2017 Supplies expenses 37500 =43000-5500. It implies that out of $43000 of supplies we have Supplies 37500 purchased, $37500 were used during this year. Remaining $5500 To record the supplies expense for the year are still on hand may be used next year. In the absense of additional information 1 to 5, we can not prepare the income statement and Balance sheet.
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