Grondy's Restaurant Company (GRC) entered into the following transactions during a recent year.
April 1 ......... Purchased a new food locker for $5,000 by paying $1,000 cash and signing a $4,000 note.
April 2 ......... Installed an air-conditioning system in the food locker at a cost of $3,000, purchased on account.
April 30 ........ Wrote a cheque for the amount owed on account for the work completed on April 2.
May 1 ......... A local carpentry company repaired the restaurant's front door, for which GRC wrote a cheque for the full $120 cost.
June 1 ........ Paid $9,120 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region. For the next four years, GRC will operate under the Mullet Restaurant name.
Required:
1. Analyze the accounting equation effects and record journal entries for each of the transactions.
2. For the tangible and intangible assets acquired in the preceding transactions, determine the amount of depreciation and amortization that Grondy's Restaurant Company should report for the quarter ended June 30. For convenience, the food locker and air-conditioning system are depreciated as a group using the straight-line method, with a useful life of five years and no residual value.
3. Prepare a journal entry to record the depreciation and amortization calculated in requirement 2.
4. What advice would you offer the company in anticipation of switching to IFRS in the future?