BSBI422 - FINANCIAL ACCOUNTING - Assignment Problem

Assignment Help Financial Accounting

Reference no: EM132408048

BSBI422 - FINANCIAL ACCOUNTING, AMA International University Bahrain

PART 1. Natalie Koebel spent much of her childhood learning the art of cookie-making from her grandmother. They passed many happy hours mastering every type of cookie imaginable and later creating new recipes that were both healthy and delicious. Now at the start of her second year in college, Natalie is investigating various possibilities for starting her own business as part of the requirements of the entrepreneurship program in which she is enrolled.

A long-time friend insists that Natalie has to somehow include cookies in her business plan. After a series of brainstorming sessions, Natalie settles on the idea of operating a cookie-making school. She will start on a part-time basis and offer her services in people's homes. Now that she has started thinking about it, the possibilities seem endless.

During the fall, she will concentrate on holiday cookies. She will offer individual lessons and group sessions (which will probably be more entertainment than education for the participants). Natalie also decides to include children in her target market. The first difficult decision is coming up with the perfect name for her business. In the end, she settles on "Cookie Creations" and then moves on to more important issues.

Instructions

1. List the form of business organization-(proprietorship, partnership, or corporation)-do you recommend that Natalie will use for her business? Discuss the advantages and disadvantages of each form and give the reasons for your choice.

2. Record why Natalie need accounting information? If yes, what information will she need and why? How often will she need this information?

3. Identify specific asset, liability, and owner's equity accounts that Cookie Creations will likely use to record its business transactions.

4.Find why should Natalie open a separate bank account for the business?

PART 2. Angela Duffy, opens her own law office on July, 1 2018. During the first month of operations, the following transactions occurred.

1. Invested BHD 10,000 in cash in the law practice.

2. Paid BHD800 for July rent on office space.

3. Purchased office equipment on account BHD3,000.

4. Provided legal services to clients for cash BHD1,500.

5. Borrowed BHD700 cash from a bank on a note payable.

6. Performed legal services for a client on account BHD2,000.

7. Paid monthly expenses: salaries BHD500, utilities BHD300, and telephone BHD100. Instructions

1. Use a tabular summary to record the previous transactions.

2. Produce the income statement for the month of July.

3. Produce the balance sheet at July 31.

4. Demonstrate the usefulness of income statement and balance sheet in making decisions.

PART 3. A good fixed asset system will provide for quick and efficient asset entry at the time of purchase, accurate tracking, customized depreciation calculations, and user-friendly reports for quick analysis.

Required:

Illustratethe features of a good fixed asset system.

PART 4. ARAMCO company purchases factory machine at a cash price of $100,000. Related expenditures are sales taxes $3000, Insurance after the installation is $6000 and Installation and testing $1,500. The machine has an estimated useful life of 6 years and salvage value is $2,000.

1. Determine the cost component of the machine.

2. Compute the total costs of the machine.

3. Using straight line method, how much will be the annual depreciation cost?

4. Compute the book value of the machine at the end of the 4th year?

PART 5. Prepare a Cash flow statement by using the below data of the Cash account 31.3.2017

Balance b/d 1.4.2016	50	Payment to suppliers	2,000
Equity shares	300	Purchase of fixed assets	200
Receipt from customers	2,800	Overhead expenses	200
Sale of fixed asset	100	Wages and salaries	100
		taxation	250
		Dividend	50
		Repayment of Loan	300
		Balance c/d(31.8.2007)	150
	3,250		3,250

Direction: Using the above details

1. Compute the operating activities

2. Compute the Investment Activities

3. Compute the Financial Activities

Reference no: EM132408048

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