The Machine Grinding Company commenced business on 1 January Year 1 with capital of £80,000 contributed by the owner. The company immediately paid cash for a grinding machine costing £80,000. It was estimated to have a useful life of 6 years and at the end of that time, it was expected to have a residual value of £8,000. During each year of operation of the machine, the company collected £60,000 in cash from customers for the provision of grinding services and paid £23,000 in cash for wages and incidental running costs.

Required:

(a) Prepare spreadsheets for each of the first 3 years of operation, analyzing the transactions and events of the company.

(b) Prepare a statement of financial position (balance sheet) at the end of Year 3 and an income statement (profit and loss account) for that year.

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Year 1 Year 2 1 Jan The Machine Grinding Company Accounting Equation Spreadsheet Depreciation calculated on a straight-line basis: = Transaction or event Amounts brought forward at start of year Machine at cost Assets Accumulated depreciation of van per annum Cash Ownership interest Capital contributed or withdrawn Revenue minus expenses