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Sunday, April 4, 2021

IB Business Management Depreciation Worksheet

 

IB Business Management Depreciation Worksheet

MB Ice(MBI)

Business management depreciation work sheet

Mill and Bill have set up a private limited company. The registered business name is MB Ice ( MBI). Mill and Bill hold the majority of shares. They make and sell a variety of ice creams. Their customers include local shops,  restaurants,  and hotels. They also have the company-owned  MB Ice Café.

The finance department of MBI presented the following key figures from the records for two years 2019 and 2020.

 

2019 ( $)

2020 ( $)

Sales turnover

35,000

42,000

Cost of sales

23,800

30,200

Expenses

6,800

8,200

Non-operating incomes

2,200

2,800

Net profit for the year

6,600

6,400

Fixed assets

40,000

40,000

Current assets

24,200

28,100

Current liabilities

12,000

13,800

 As per the company policy, fixed assets are depreciated at the rate of 5 percent per annum using the reducing balance method.

However, on examination of accounts, it was discovered that depreciation was provided for both years while calculating profit.

 Questions:

a)     With reference to  MBI, explain two features of private limited company

 

[ 4 marks]

b)    Explain the following:

        i.            Straight-line method of depreciation

      ii.            Reducing  balance method of depreciation

 

 

[ 4 marks]


c)     Using the financial information provided for 2019 and 2020, prepare  profit and loss accounts for two years to recalculate profit incorporating the provision for depreciation.

 

[12 marks]


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