The biscuit machine in question C8.1 was sold at the end of Year 4 for a price of £3,000. Required

(a). Prepare the spreadsheet for Year 4 analysing the transactions and events of the year.

(b). Prepare the statement of financial position (balance sheet) at the end of Year 4 and the income statement (profit and loss account) for Year 4.

(c). Explain to a non-accountant the accounting problems of finding that the asset was sold for £3,000 when the original expectation was £2,000.

 

Data from question C8.1

The Biscuit Manufacturing Company commenced business on 1 January Year 1 with  capital of £22,000 contributed by the owner. It immediately paid cash for a biscuit  machine costing £22,000. It was estimated to have a useful life of four years and at the  end of that time was estimated to have a residual value of £2,000. During each year of  operation of the machine, the company collected £40,000 in cash from sale of biscuits  and paid £17,000 in cash for wages, ingredients and running costs.