Question ACC506 – Requirements ATMC Semister-3 (2016)

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Question ACC506 – Requirements ATMC Semister-3 (2016).
As at the 1st June, Julie Jones and Katy Perry establish a new business Café &Catering (a partnership with 50% equal share in profits to both regardless of Proprietor’s Contribution). They register the new business and open a new bank account with the local branch of Eastside Bank. Note the business is also registered for GST.

JUNE TRANSACTIONS

 FIRST WEEK

  • Monday 1sth June
    • Julie deposits cash of $15,000 into the new Bank Account and Katy contributes $2,000 cash and:
      • Café equipment with a book value of $7,200
      • China glass silver and linen book value of $3,600
      • The office Equipment book value of $2,200.
Asset Method Expected Life Expected Salvage
Café Equipment Straight Line 4 Years $0.00
China Glass silver Linen Straight Line 2 Years $0.00
Office Equipment Reducing Balance 3 Years $5.00

(Note as the equipment, china glass silver linen and office equipment have been used in a previous business there is no GST attributed to the contribution).

Purchased $1,100 worth of General Café Supplies from Coco Suppliers – issued cheque # 0001. (Asset: 1010)

Purchased a computer for $440 – issued cheque #0002. (Office Equipment)

Withdrew $50.00 cash from an ATM to establish a petty cash account. (No GST for this transaction)

Katy has the telephone installed by Rossini Communications – the contract is for a monthly line rental of $44.00 plus charges for calls made. Cheque # 0003for $132.00 is issued.

Write a brief report to Julie and Katy commenting on the financial performance of the business

  • Calculate the following financial ratios and provide comments –
    • Current ratio
      • Industry average is 5:1
      • Accounting Norm is 3:1
    • Quick ratio
      • Industry average is 4: 1
      • Accounting Norm is 1:1
  • Calculate and provide a cash flow statement for the first month of trading.
  • Using academic references (recorded using Harvard Referencing style) list and briefly explain the registrations and legal requirements that Julie and Katy would have undertaken to establish the business name and partnership.