On the first of May Linda buys a coffee business from Tom for $20000. For this she receives a car originally purchased for $25000 with accumulated depreciation of $10000 with a built in coffee machine purchased for $5000 with accumulated depreciation of $4000 together with $2000 of coffee, sugar and disposable coffee cups.
During May she sells a total of 2500 cups of coffee @ $4 each at various locations around the city. She also purchases $3000 of coffee, $1000 of milk and $500 of sugar. She pays for the milk and sugar with cash, but the coffee supplier allows her 30 day terms before she has to pay for the coffee. Finally she pays herself a $4000 salary for the month.
In June she decides to move into the corporate market, thinking that it might be more lucrative, and runs several corporate functions worth $20000. She collects $8000 of this income during the month and expects to collect 90% of the remainder. She also purchases $4000 of coffee, $1000 of milk, $500 of sugar and $500 of disposable coffee cups. She pays for the milk and sugar with cash, plus she pays the $3000 that she owes the coffee supplier from May. The coffee supplier once again allows she 30 day terms before she has to pay for the new order of coffee. She also pays herself a $4000 salary for month.
The other major issue in June is that her coffee machine breaks and so she sells it for scrap for $500 and purchases a new machine for $6000 (paying with a $3000 cash deposit and terms to pay the other $3000 within 30 days).
At the end of June she calculates that her car has depreciated by $500 for the two months and she performs a stocktake to find that she has $2000 of coffee, sugar and disposable coffee cups remaining.
What do Linda’s financial accounts look like at the end of June? She will have a tax rate of 20%.
On the first of May Linda buys a coffee business from Tom for $20000. For this she receives a car originally purchased for $25000 with accumulated depreciation of $10000 with a built in coffee machine purchased for $5000 with accumulated depreciation of $4000 together with $2000 of coffee, sugar and disposable coffee cups. During May she sells a total of 2500 cups of coffee @ $4 each at various locations around the city. She also purchases $3000 of coffee, $1000 of milk and $500 of sugar. She pays for the milk and sugar with cash, but the coffee supplier allows her 30 day terms before she has to pay for the coffee. Finally she pays herself a $4000 salary for the month. In June she decides to move into the corporate market, thinking that it might be more lucrative, and runs several corporate functions worth $20000. She collects $8000 of this income during the month and expects to collect 90% of the remainder. She also purchases $4000 of coffee, $1000 of milk, $500 of sugar and $500 of disposable coffee cups. She pays for the milk and sugar with cash, plus she pays the $3000 that she owes the coffee supplier from May. The coffee supplier once again allows she 30 day terms before she has to pay for the new order of coffee. She also pays herself a $4000 salary for month. The other major issue in June is that her coffee machine breaks and so she sells it for scrap for $500 and purchases a new machine for $6000 (paying with a $3000 cash deposit and terms to pay the other $3000 within 30 days). At the end of June she calculates that her car has depreciated by $500 for the two months and she performs a stocktake to find that she has $2000 of coffee, sugar and disposable coffee cups remaining. What do Linda’s financial accounts look like at the end of June? She will have a tax rate of 20%.
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