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Wednesday, April 21, 2021

IB Business Management Depreciation worksheet 4

 

IB Business Management 

Depreciation worksheet  Joe’s Pizza

 

 

IB Business Management Depreciation worksheet

Joe’s Pizza(JP) was started by Ian Lefkowitz in the year 2000. It is a private limited company and has currently 5 locations in the US. It is famous for its cheesy and top-quality pizza and is one of the top pizzerias in the US. The restaurant wants to expand and grow organically. In the past, the company faced allegations and lawsuits due to poor hygiene. Hence, the company wants to improve its corporate image by using popular CSR strategies and wants to spread the PR message that their kitchens are now safe and that all the required sanitation is done regularly.

Joe’s Pizza recently hired a new accountant to manage and project their financial statements. While preparing the records , the accountant had forgotten to include depreciation of the Joe’s fixed assets. The value of the fixed assets was  $250 000 when they were purchased. The accountant then calculated on the basis of a  five year life for the assets and estimated a scrap value of $75 000.

 Financial information for Joe’s Pizza Ltd for the years 2019 and 2020

 

2019

2020

$

$

Sales Revenue

500 000

600 000

Cost of Goods Sold

150 000

230 000

Non- operating incomes

70 000

90 000

Expenses

100 000

150 000

Interest

10 000

12 000

Tax

35 000

45 000

Table 1

 Questions:

a)     Accountant has forgotten to include provision for depreciation in annual accounts. Explain two impact of this on financial statements of JP.

 

 

(2 marks)

b)    Using the relevant figures from the stimulus, calculate the annual amount of depreciation. Show all your workings

 

(2 marks)

c)     Using your answer ( b) and information given in the  table 1,  prepare profit and loss account for both the years and calculate  profit after interest and tax(PAIT)

 

 

( 6 marks)

 

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