Nicole and Roxanne want to put up a twenty-bed boarding house along the Universi

Question

Nicole and Roxanne want to put up a twenty-bed boarding house along the University Belt. A study of other boarding houses shows that they would need the following: Beds and mattresses-Ph3000 Lockers and cabinets-Ph500; Furniture for receiving rooms-Ph500;Furniture for dining room- h1500; Tools, Equipment, and Utensils for Kitchen-Ph2000. They can secure a Ph2500 loan from an Employee's Cooperative, of which they are members 1. Assuming they will need an initial working fund of Ph500, how much more capital must be raised to finance his business? 2. If you were their accountants would you capitalize the required expenditures? Why? In which Financial Statements will you recognize them? 4 How will they be recorded as entries in the financial statementfs)?

Explanation / Answer

1)capital to be raised =3000+500+500+1500+2000-2500+500=5500

2) we have to capitalise expenses of 5000 because benefits of this accurate for more than 1 year

3) assets will be shown in balance sheet

4)bank a/c Dr 5500

To capital a/c. 5500

Beds and mattress a/c. Dr. 3000

Locker and cabinet a/c. Dr 500

Furniture a/c. Dr 2000

Utensils a/c. Dr 2000

To Bank a/c. 7500

Banks/c Dr 2500

Toloan a/c. 2500

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