This document provides accounting information for Kim Fuller's recycling business. It includes an opening balance sheet showing his initial investments and assets/liabilities. It provides assumptions for transactions in the first 5 months, including materials purchased, wages paid, depreciation amounts. Using this information, an income statement is presented showing revenues of $170,000 and expenses of $152,790, resulting in a net income of $17,210. A closing balance sheet is also presented reflecting the business after 5 months of operations.
It is a case study of Kim Fuller, who was working in a large chemical firm as a District Sales Engineer HE learned that company had developed use for the recycled material in pulverized form.
Although there is a possibility of both profit and loss, We have seen profit.
Please see rest of the details in following slides.
The partnership was formed by Mr. and Mrs. Henry Antoine and Mrs. Sandra Landers, who had become acquainted while working in a Portland, Oregon, restaurant. On November 1, 2009, each of the three partners contributed $16,000 cash to the partnership and agreed to share in the profits proportionally to their contributed capital (i.e., one-third each). The Antoine's’ contribution represented practically all of their saving. Mrs. Landers’ payment was the proceeds of her late husband’s insurance policy.
His friends offered to invest in a new corporation with a $2,00,000 capitalization.Creator of a new and improved commercial paint spray.The incorporation cost was $2,500
Cost of equipment to be used in assembling the paint spray dispensers was $85,000
Short term loan from local bank was $30,000.
Manufacturing payroll was $145,000
Other manufacturing cost was $62,000
The sales done was $598,500
Depreciation cost was $8,500 but Hynes estimated the useful life of equipment to be 10 years.
It is a case study of Kim Fuller, who was working in a large chemical firm as a District Sales Engineer HE learned that company had developed use for the recycled material in pulverized form.
Although there is a possibility of both profit and loss, We have seen profit.
Please see rest of the details in following slides.
The partnership was formed by Mr. and Mrs. Henry Antoine and Mrs. Sandra Landers, who had become acquainted while working in a Portland, Oregon, restaurant. On November 1, 2009, each of the three partners contributed $16,000 cash to the partnership and agreed to share in the profits proportionally to their contributed capital (i.e., one-third each). The Antoine's’ contribution represented practically all of their saving. Mrs. Landers’ payment was the proceeds of her late husband’s insurance policy.
His friends offered to invest in a new corporation with a $2,00,000 capitalization.Creator of a new and improved commercial paint spray.The incorporation cost was $2,500
Cost of equipment to be used in assembling the paint spray dispensers was $85,000
Short term loan from local bank was $30,000.
Manufacturing payroll was $145,000
Other manufacturing cost was $62,000
The sales done was $598,500
Depreciation cost was $8,500 but Hynes estimated the useful life of equipment to be 10 years.
Tata Motors in the year 2008 acquired two of the most recognized premium segment car brand - Jaguar & Land Rover for a price tag of $2.5 billion. This presentation tells you about the history of Tata Motors, Jaguar and Land Rover, details of the deal, key motives of the merger, challenges in the merger, and both the companies current stage.
Tata Motors in the year 2008 acquired two of the most recognized premium segment car brand - Jaguar & Land Rover for a price tag of $2.5 billion. This presentation tells you about the history of Tata Motors, Jaguar and Land Rover, details of the deal, key motives of the merger, challenges in the merger, and both the companies current stage.
Accounting for Business Major Assignment SP1 2015 Instructions.docxannetnash8266
Accounting for Business Major Assignment SP1 2015 Instructions
Due Date Thursday 7th May 2015 1.00pm Assignments must be submitted through the Turnitin link on the subject portal
Groups up to 3 students maximum are permitted.
Assignment must be in word format only.
All calculations and workings must be shown to receive any marks for each question
Do not include the question in your answers!
Question 1
Bill Smith has started a lawn mowing business (Bill’s Lawnmowing) as a temporary job/business which he intends to run until he starts his business degree at the University of South Australia in five months. Bill has never owned or run a business before. To start the business on 1 February 2014, he deposited $3,600 into a new bank account opened in the name of the business. The $3,600 consisted of a $3000 interest free loan from his Uncle (to be repaid in full over 2 years in equal amounts at the end of each month) and $600 of his own money. Bill rented some equipment, purchased supplies, and hired friends to mow and trim his customer’s lawns.
At the end of each month Bill sent invoices to his customers. On 30th June, he was ready to dissolve the business and start his university studies. As he was so busy, he kept few records other than his cheque book and a list of amounts owed to him by customers.
At 30 June, Bill’s business account cheque book shows a balance of $2,245, and his customers still owe him $750. During the period, he collected $5,800 from customers. His cheque book lists payments for supplies totalling $550, and he still has fuel and supplies that cost a total of $75 on hand. He paid his employees $3,200, and he still owes them $620 for their final week of work.
Bill rented some equipment from Kennard’s Hire. On 1 February, he signed a six-month rental agreement on lawnmowers and paid $1050 for the full period. Kennard’s Hire will refund the unused portion of the prepayment if the equipment is in good order when he returns it. In order to get the refund, Bill has kept the equipment in excellent condition. In fact during May paid $310 to repair one of the mowers.
To transport employees and equipment to jobs, Bill used a trailer that he bought for $780. He believes that the period’s work used up one-quarter of the trailer’s service potential. The business cheque book lists a payment of $660 for private cash withdrawals by Bill during the period, in addition he has a diary entry indicating that he also used $35 worth of fuel for his own vehicle.
Bill estimates that he spent approximately 45 hours working on the business during the period. He plans to recommence operations on a similar basis during major breaks in his university study and believes he will do better in later periods as he now has an existing customer base to work from.
Required
1. Prepare the business Income Statement for the period.
(9 marks)
2. Prepare the classified Balance Sheet at the end of the period.
(11.
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3. INTRODUCTION
Kim Fuller, who was working in a large chemical
firm as a District Sales Engineer. He learned that
company had developed use for the recycled
material in pulverized form.
In November 2010, he checked for initial cost of
the business.
4. For that he bought a truck, three trailers, two
grinding machine & supplies and parts to run
and maintain the business.
He also purchased a computer, warehouse,
accounting software.
He also invested his savings of $75,000.
5. He borrowed $90,000 from his two sisters and a
brother for down payment of $50,000 for warehouse.
He also hired a truck driver and grinding machine
workers.
He took help of his neighbors for learning &
purchasing of accounting software.
He obtained enough knowledge for recording
transactions from his neighbor.
6. ACCOUNTING INFORMATION
Owned capital was of $75,000 from his savings.
Acquired used truck and 3 trailers, grinding
machine, machine part, personal computer for
total of $65,000
Borrowed $90,000 from two sisters and brother
for down payment of building.
Warehouse of $162,000 and paid $50,000 as its
down payment.
7. NON ACCOUNTING INFORMATION
Fuller think to start a business of plastic bottles.
Learnt maintaining books of accounts for bank
dealings, tax returns and general management
of the company.
List out the purchased items, debts and other
information in Accounting Software.
8. Fuller signed contract with two bottling companies
and started business by companies and hiring
grinding machine workers and a truck driver.
In Nov 2010, he started to find out the cost involved
in setting up the business Found a warehouse.
Approval of mortgage from bank for balance of
building.
9. SOME ACCOUNTING CONCEPTS
Dual Aspect Concept:
The dual aspect concept states that every
business transaction requires recordation in
two different accounts. This concept is the
basis of double entry accounting.
Accrual Concept:
Accrual concept is the most fundamental
principle of accounting which requires
recording revenues when they are earned
and not when they are received in cash, and
recording expenses when they are incurred
and not when they are paid.
10. Money Measurement Concept:
means only those transactions and events that are
capable of being measured in monetary terms are
recognized in the financial statements.
Matching Principle:
This is the concept that, when you record revenue,
you should record all related expenses at the same
time.
11. CONSISTENCY PRINCIPLE:
This is the concept that, once you adopt an
accounting principle or method, you should
continue to use it until a better principle or
method comes along.
COST PRINCIPLE:
This is the concept that a business should
only record its assets, liabilities, and equity
investments at their original purchase costs.
12. OPENING BALANCE SHEET OF KIM FULLER AS ON
NOVEMBER 2010
Liabilities Amounts($) Assets Amounts($)
Owner’s equity 75,000 Non – Current Assets
Fixed assets 65,000
Secured Loan Warehouse 1,62,000
Mortgage loan
(against Warehouse) 1,12,000 Current Assets
Cash/ Bank 50,000
Unsecured Loan
Family loan 90,000
Total 2,77,000 Total 2,77,000
13. FIXED ASSETS INCLUDE:
Grinding Machine $ 29000
Truck and Trailers $ 30000
Supplies and Parts $ 5000
Personal Computer $1000
$ 65000
15. STRENGTHS
Excellent location for business.
Accounting support from neighbor.
He researched the entire element before
starting the business.
Ready raw material was available which
were cheaper so, he can grab high profit
due to low total cost.
He manages to get the borrowed capital from
his relative on Cheaper bank interest rate.
16. WEAKNESS
Borrowed capital is more than the owned
capital which result into more interest
payment.
He is taken big amount of mortgage loan
which result into more interest payment.
He invested a huge sum of money into
purchased the warehouse , which results into
more interest payment.
17. INFORMATION NEEDED TO DETERMINE
“PROFIT OR LOSS”
As in the case there is no information is
available regarding profit and loss so we
required the following information.
a. Information related to Purchase and sales.
b. Information related to wages and salary paid to
workers and driver.
c. Information related to rate of interest on loan.
d. Information related to rate of depreciation on
various assets.
18. TRANSACTION & ASSUMPATION
Purchased raw material worth $1,00,000.
Paid wages to workers and truck driver is $30,000.
Depreciation on Fixed Assets @15%, $4,065 for 5
months.
Purchased accounting software $ 100
Interest paid for mortgage loan @12%, $5,600 for 5
months
Interest paid to the relatives for the borrowed loan @8%,
$3,000 for 5 months.
Depreciation on Warehouse building @15%, $10,125 for
5 months.
Sales made worth $ 1,50,000.
Closing Stock at the end of year $20,000.
19. INCOME STATEMENT OF KIM FULLER FOR THE YEAR ENDED
31ST MARCH 2011
Receipts Amount($)
Sales revenue 1,50,000
Closing stock 20,000
(A) Total 1,70,000
Expenses Amount($)
Purchased 1,00,000
Wage paid 30,000
Depreciation on fixed asset 14,190
Interest on mortgage Loan 5,600
Interest on relative’s loan 3,000
(B) Total 1,52,790
Net income (A-B) 17,210
20. ANALYSIS OF FULLER’S BUSINESS
Mr. fuller has just started his business and now he
is stared getting contracts but not having too much
of sales and the expenses are high so he was not
able to make high profit but now he is having all the
machinery and equipments so eventually he’ll
make profit.
21. CLOSING BALANCE SHEET OF KIM FULLER AS ON 31ST
MARCH 2011
Liabilities Amount(
$)
Assets Amount(
$)
Owners equity 75000 Non-current assets
Reserve & Surplus 17,210 Fixed assets
65,000
(-) Deprecation
4,065
60,935
Warehouse
1,62,000
(-) depreciation
10,125
1,51,875
Secured Load Accounting software 100
Mortgage loan
(against Warehouse) 1,12,000 Current account
Unsecured Loan Cash/ bank 61,300