Brynn Company ifting through useful and some useless, even spurious, An exercise

Question

Brynn Company ifting through useful and some useless, even spurious, An exercise in deduction and s information.) Brynn Company began operations on September 19, 2016 (at 5:07 PM to be precise). They have come to you because they want to borrow money from the bank to expand. The bank has 1 From the Tollowing information, record the transactions and prepare all financial statements for the period September 19- December 31, 2016. Per the checkbook Cash received for 700 shares of common stock-$70,000 Cash received from Brother on October 1, 2016, $50,000, repayable at $10,000 per year plus 5% interest. Cash received from customers- $160,000. Cash paid for inventory $100,000. Security deposit to landlord for store-$3,000 Cash paid for rent $12,000 Cash paid for equipment for store, $30,000. It is estimated that this equipment will last for six years and then be worthless. (Calculate depreciation on a monthly basis for this problem.) The actual cost of the equipment was $60,000, the rest of the cost will be paid in equal annual payments of S for five years. The payments include interest at 6% and the first payment is due Sept 1, 2017 Cash paid for wages, $12,000 Cash paid for two-year insurance policy (runs from 10/01/16-9/30/18), $2,400. Cash paid for other operating expenses, $3,000. Cash paid for dividend, $2,000 Other Information On November 1, Brynn hired Bill as an employee. They agreed his wages would be $2,000 per month payable on the first day following each month he worked. On September 1, Brynn signed a three-year lease for the store it was to use. The lease called for a security deposit and monthly payments of $2,000 due at the beginning of each month At the end of December, Brynn its inventory suppliers $10,000. Bryn also owed wages of $6,000 at December 31st. On December 31st, the company ordered $20,000 worth of merchandise which was received January and will be paid for in February At December 31, 2016, Brynn took a physical inventory and found they had inventory on hand that cost them $30,000. (This is their ending inventory.) Customers owed Brynn Company $20,000 at the end of December. The tax rate is 30% Prepare all Financial Statements and calculate and analyze all ratios. think before you complain, especially about things that require some sacrifice. Complaining is the sign of a loser." - Lou Holtz, A Teen's Game Plan for Life

Explanation / Answer

Depreciation= Original Cost of Asset - Scrap Value
Effective life

Here Original cost = 60,000

Effective life = 6 yrs

Scrap Value = 0

So Depreciation = (60,000-0)/6= $10,000 for each year on a straight line method

In the problem it is mentioned that depreciation to be made on a monthly basis. therefore Monthly depreciation will be 10,000/12 =$ 833.33

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