Initial investment in the business assessment answers

Subject Name : Accounting

2019
BUSINESS

Contents
TOC o 1-3 h z u A brief description of the nature of the business PAGEREF _Toc4311967 h 4Initial investment in the business PAGEREF _Toc4311968 h 4Purchase of long term assets for cash PAGEREF _Toc4311969 h 5Purchase of long term assets on credit PAGEREF _Toc4311970 h 5Sales made for cash or credit PAGEREF _Toc4311971 h 5Sales returns and purchase returns PAGEREF _Toc4311972 h 6Purchases of inventory on cash or credit PAGEREF _Toc4311973 h 6Expenses paid by cash or on credit PAGEREF _Toc4311974 h 6Cash paid to creditors for amount owed to them PAGEREF _Toc4311975 h 7Cash received from customers for amount owing from them PAGEREF _Toc4311976 h 7Different adjusting entries PAGEREF _Toc4311977 h 7General ledger done on Peachtree (Screen shot of chart of accounts) PAGEREF _Toc4311978 h 8Income statement of two months generated from Peachtree (Screenshot) PAGEREF _Toc4311979 h 19Balance sheet generated from Peachtree (screenshot) PAGEREF _Toc4311980 h 20Inventory valuation report generated from Peachtree (screen shot) PAGEREF _Toc4311981 h 21Answers to questions PAGEREF _Toc4311982 h 211.How is the accounting different for a merchandising company compared to a service company PAGEREF _Toc4311983 h 212.Give at least 3 benefits to using a computerized accounting package with an inventory module to account for a merchandising company. PAGEREF _Toc4311984 h 213. What is the difference between remit to and ship to PAGEREF _Toc4311985 h 224. Which inventory methods can you choose in Peachtree PAGEREF _Toc4311986 h 225. What decisions can managers make based on the information on the inventory valuation report PAGEREF _Toc4311987 h 22References PAGEREF _Toc4311988 h 23
A brief description of the nature of the businessThe merchandizing business, Global Fruit Company, will import fruits from across the world and distribute it in the domestic market. The vision of the business is to become the biggest distributor of imported fruit items in the domestic market in the next 5 years.
Initial investment in the businessInitial investment in the business will go towards setting up a refrigerated warehouse. This warehouse will be used for storing fruits that are imported and before they are distributed in the domestic market. Initial investment will also be made in setting up an office of the company. A certain amount of inventory will be built and stored in the warehouse before the business begins operations. Investments will also be made in IT infrastructure such as office computers and servers and software such as accounting software. The business will have 10 employees from the first day of operations. Salary of first three months of these employees will also be part of the initial investment.
Investment in setting up a refrigerated warehouse 100,000
Investment in setting up an office of the company 50,000
Initial inventory of fruits 90,000
Investment in IT infrastructure 40,000
Initial three months salary of the 10 employees 111410
Total initial investment 391410
Purchase of long term assets for cashLong term assets are those assets that will generate economic benefits for a period of more than one year. The long term assets for setting up the business of Global Fruits Company that will be purchased for cash are
Refrigerated warehouse for 100,000 on 1st January 2019
IT infrastructure assets for 20000 on 1st January 2019
Total value of long term assets that will be purchased for cash 120000
Office space will be taken on lease. Therefore it has not been included in the list of long term assets that will be purchased for cash. Inventory of fruits is a current asset and not a long term one.
Purchase of long term assets on creditTwo long term assets that will be purchased on credit are
Server computer (part of IT infrastructure asset) on 1st January 2019 10000
Data storage devices and supply chain management software (part of IT infrastructure asset) on 1st January 201910000
Total value of long term assets on credit 20000
Sales made for cash or creditThe following sales were made on cash
To David fruit stores (on cash) on 5th January 2019 30000
To Al Dariya Mart (on cash) on 15th January 2019 20000
To Kevin amp Sons restaurant (on credit) on 25th January 2019 20000
To Baker Street Company (on credit) on 5th February 2019 10000
To Al Azhar store (on cash) on 15th February 2019 10000
To Smith amp Company (on credit) on 25th February 2019 10000
Total sales made on cash and credit 100000
Sales returns and purchase returnsThe following sales returns were made by Al Dariya Mart due to poor quality
From Al Dariya Mart on 16th February 2019 10000
The following purchase returns were made to Kings amp Company fruit suppliers, Bogota Columbia, due to poor quality
To Kings amp Company fruit sellers on 17th February 2019 10000
Purchases of inventory on cash or creditFruits purchased from Kings amp Company, Bogota, Columbia, on cash on 1st January 2019
30,000
Fruits purchased from United Fruit Company on cash on 1st January 2019 30000
Pineapples purchased from Pineapple Company on cash on 3rd January 2019 20000
Mangoes purchased from Gupta amp Company on credit on 8th January 2019 10000
Bananas purchased from Khan amp Company on credit on 9th January 2019 5000
Apples purchased from Jeffry Fruit supplier on credit on 11th January 2019 5000
Total purchase of inventory 100000
Expenses paid by cash or on creditExpenses paid by cash
Transportation of fruits from port of entry to warehouse on 1st January 2019.1000
Transportation of mangoes from port of entry to warehouse on 7th January 20191000
Expenses paid by credit
Transportation of pineapples from port of entry to warehouse on 3rd January 2019..1000
Transportation of bananas from port of entry to warehouse on 9th January 2019.1000
Cash paid to creditors for amount owed to themPayment for transportation of pineapples from port of entry to warehouse to MS Transport Co on 18th January 2019..1000
Payment for transportation of bananas from port of entry to warehouse on 24th January 20191000
Cash received from customers for amount owing from themFrom Baker amp Company on 22nd February 201910000
From Kevin amp Sons restaurant on 28th February 2019..10000
From Smith amp Company on 28th February
2019..10000
Different adjusting entriesDepreciation of warehouse on 31st January 2019.. 833
Depreciation of IT assets on 31st January 2019. 667
Depreciation of warehouse on 28th February 2019. 833
Depreciation of IT assets on 28th February 2019. 667
Deferred miscellaneous expenses on 31st January 2019500
Deferred miscellaneous expenses on 28th February 2019..500
General ledger done on Peachtree (Screen shot of chart of accounts)

Income statement of two months generated from Peachtree (Screenshot)

Balance sheet generated from Peachtree (screenshot)

Inventory valuation report generated from Peachtree (screen shot)
Answers to questionsHow is the accounting different for a merchandising company compared to a service companyThe difference in accounting for a merchandizing company and a service company arises from the fact that a merchandizing company has to keep inventory while a service company ,generally, does not have to keep inventory CITATION Bas17 l 1033 (Basu, 2017). The choice of inventory valuation method in accounting is therefore important for a merchandizing company but not for a service company.
Give at least 3 benefits to using a computerized accounting package with an inventory module to account for a merchandising company.Three benefits of using a computerized accounting package with an inventory module to account for a merchandizing company are
It enables more accurate perpetual inventory valuation CITATION Bra171 l 1033 (Bragg, 2017).
Faster and more accurate counting of inventory can be done.
More efficient inventory management.
3. What is the difference between remit to and ship toRemit to is the address to which the invoice is sent. Ship to is the address to which the goods are to be shipped. Both remit to and ship to addresses can be same or different CITATION Cli15 l 1033 (Clinton amp Van der Merwe, 2015).
4. Which inventory methods can you choose in PeachtreeFIFO (First in, first out), LIFO (Last in, first out) and Average costing method can be chosen in Peachtree.
5. What decisions can managers make based on the information on the inventory valuation reportBased on information on the inventory valuation report, managers can make decisions such as when to reorder the inventory or is there too much inventory CITATION Nee13 l 1033 (Needles amp Powers, 2013). In case the inventory valuation report shows high levels of inventory then the managers have to take decision regarding how to dispose off the excess inventory. Decisions regarding demand of the product can also be taken from inventory valuation report.

References BIBLIOGRAPHY Basu, C. (2017). How to record a sales return for accounting. Chron, https//smallbusiness.chron.com/record-sales-return-accounting-10216.html.
Bragg, S. (2017). First in First out method. Accounting Tools, https//www.accountingtools.com/articles/2017/5/13/first-in-first-out-method-fifo.
Clinton, B., amp Van der Merwe, A. (2015). Management Accounting - Approaches, Techniques, and Management Processes. Cost Management. New York Thomas Reuters RIA Group.
Needles, B. E., amp Powers, M. (2013). Principles of Financial Accounting. . Financial Accounting Series (12 ed.).Cengage Learning.