Part 2 (10 Marks) A recent graduate. Bob, struggled to find work as an accountart. While...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Part 2 (10 Marks) A recent graduate. Bob, struggled to find work as an accountart. While at home one day. he noticed large trucks with ful-grown trees driving past They were going to a new housing Bdevelopment in his street, where landscapers were developing the gardens and planting mature trees as instant landscape features Because Bob had grown up in a faming area and worked on fams in his vacations, he had some knowledge about growing trees and decided that he would do some research and find a gap in the market for something similar. He and his triend Neo, who had some inherited money, started a small business selling ful- grown paim trees. The paim trees were in high demand from municipalities all over South Africa. While visiting his university lecturer. Bob asked her advice as to what would be the best way to register the business so that it would benefit both himself and Neo. (Bob had no start-up capital of his own and the two friends would have to borrow more money to get the business going). As he left the university area, he noticed a vacant piece of land that had previously been used as a fruit farm. looked fertile and suitable for growing young paim trees and also storing sourced (purchased) older palm trees. Once Neo had agreed and become imvolved in this business idea, he two friends decided to (put in an offer to purchase the property on 1 July ater the registration of their business. A purchase price of NS 900 000 was paid on 31 July 20x0 The property was then registered in the deeds office on 15 August 200 in the name of Breezy Palms Enterprises. The property was now theirs to do with as they pleased. The purchased price was paid from Noes capital of NS 30 000 and Loan rom One Love Bank). This agreement was entered into on 31 July 20x0 at an interest rate of 10% payable monthly with the capital portion of the loan being payable in monthly instaiments over a period of 10 years. On 1 September, they brought in another company. Trees Planters CC. who would supply and plant the trees that would generate revenue over many years. Trees Planters charged them NS 10 000 for every hectare of trees planted. Bob and Neo then agreed to an addtional maintenance contract with Trees Planters CC. stipulating that they would maintain and prune the young trees to ensure that they grew upright over the next 10 years, for an annual fee of NS 15 000. During the current year, Breezy Palms Enterprise incurred NS 150 000 on the purchase and planting of the trees was well as NS 15 000 on the pruning and maintenance of the trees. Bob and Neo took care of the sourcing of mature trees themselves which cost them NS 3 000 a month in adverting, labor and transport. Bob and Neo employed an expert to do a profitability study. The report fom the expert revealed that they could expect a retum on investment of 23% over the period of 10 years The accountants showed every cost incurred as an expense in the current year. The financial director feels that a part of the transactions above may be stated as an asset. Finoncial Accounting 18 (AFE3692) mdvdual Asigament Due denr 2 October 2000 REQUIRED: Provide a web- reasoned argument with reference to the accounting frameworks as to whether the treatment of the above transactions was appropriate. Your ansaer should distinguish between these transactions 1. The purchase of land 2 Loan from One Love Bank 3. Planting. pruning and maintenance of young trees Part 2 (10 Marks) A recent graduate. Bob, struggled to find work as an accountart. While at home one day. he noticed large trucks with ful-grown trees driving past They were going to a new housing Bdevelopment in his street, where landscapers were developing the gardens and planting mature trees as instant landscape features Because Bob had grown up in a faming area and worked on fams in his vacations, he had some knowledge about growing trees and decided that he would do some research and find a gap in the market for something similar. He and his triend Neo, who had some inherited money, started a small business selling ful- grown paim trees. The paim trees were in high demand from municipalities all over South Africa. While visiting his university lecturer. Bob asked her advice as to what would be the best way to register the business so that it would benefit both himself and Neo. (Bob had no start-up capital of his own and the two friends would have to borrow more money to get the business going). As he left the university area, he noticed a vacant piece of land that had previously been used as a fruit farm. looked fertile and suitable for growing young paim trees and also storing sourced (purchased) older palm trees. Once Neo had agreed and become imvolved in this business idea, he two friends decided to (put in an offer to purchase the property on 1 July ater the registration of their business. A purchase price of NS 900 000 was paid on 31 July 20x0 The property was then registered in the deeds office on 15 August 200 in the name of Breezy Palms Enterprises. The property was now theirs to do with as they pleased. The purchased price was paid from Noes capital of NS 30 000 and Loan rom One Love Bank). This agreement was entered into on 31 July 20x0 at an interest rate of 10% payable monthly with the capital portion of the loan being payable in monthly instaiments over a period of 10 years. On 1 September, they brought in another company. Trees Planters CC. who would supply and plant the trees that would generate revenue over many years. Trees Planters charged them NS 10 000 for every hectare of trees planted. Bob and Neo then agreed to an addtional maintenance contract with Trees Planters CC. stipulating that they would maintain and prune the young trees to ensure that they grew upright over the next 10 years, for an annual fee of NS 15 000. During the current year, Breezy Palms Enterprise incurred NS 150 000 on the purchase and planting of the trees was well as NS 15 000 on the pruning and maintenance of the trees. Bob and Neo took care of the sourcing of mature trees themselves which cost them NS 3 000 a month in adverting, labor and transport. Bob and Neo employed an expert to do a profitability study. The report fom the expert revealed that they could expect a retum on investment of 23% over the period of 10 years The accountants showed every cost incurred as an expense in the current year. The financial director feels that a part of the transactions above may be stated as an asset. Finoncial Accounting 18 (AFE3692) mdvdual Asigament Due denr 2 October 2000 REQUIRED: Provide a web- reasoned argument with reference to the accounting frameworks as to whether the treatment of the above transactions was appropriate. Your ansaer should distinguish between these transactions 1. The purchase of land 2 Loan from One Love Bank 3. Planting. pruning and maintenance of young trees
Expert Answer:
Answer rating: 100% (QA)
Answer Summotized the data and infoomation given in the question A rsecent groaduate Bo... View the full answer
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
Posted Date:
Students also viewed these accounting questions
-
What would be the best way or combination of ways to educate your employees about the acquisition? Oral media, written media, visual media and/or electronic media?
-
South Africa is home to huge reserves of coal, gold, diamonds, and natural gas. In addition to their intrinsic value, gold and diamonds have many industrial uses in which South Africa is the world...
-
A friend of yours has decided to start her own home decorating business. She has decided to establish the business as a sole proprietorship and to operate out of her home for now. Because she already...
-
Which of the following represents the GREATEST risk created by a reciprocal agreement for disaster recovery made between two companies? A. Developments may result in hardware and software...
-
With reference to Exercise 8.44, (a) Test H0: = 2.0 H1: 2.0 with = .02. (a) What error could you have possibly made? (b) Based on your decision in part Explain in the context of the problem.
-
Street, Rhode and Close carried on business in partnership sharing profits and losses, in the ratio 5 : 4 : 3. Their draft statement of financial position as on 31 March 20X2 was as follows: Street...
-
How can HRIS T&D applications help firms foster organizational learning?
-
RadioShack Corporation primarily engages in the retail sale of consumer electronics goods and services through 4,467 company-operated stores under the RadioShack brand, located throughout the United...
-
In 2019, Rylan Enterprises' net income increased by $2.5 million while its depreciation expense decreased by $500,000, accounts receivable increased by $2,000,000 and accounts payable increased by...
-
Kai is the president of Zebra Antiques. An employee, Reese Francis, is due a raise. Reeses current benefit analysis is as follows: Compute the benefit analysis assuming: 3 percent increase in pay. ...
-
Dwayne Wales contributed equipment, inventory, and $106.000 cash to a partnership. The equipment had a book value of $50,000 and a market value of $56,000. The inventory had a book value of $100,000...
-
Your father owns a small family business but he is of the opinion that he does not have to be concerned about economics as it is a government related matter. As a student exposed to the scope of...
-
The Canadian Ministry of Health seeks to design a comprehensive program to Improve the health conditions of the community. For this reason, it is necessary to properly estimate the amount of vitamin...
-
A45kgchild on a sled is pulled through6.00mon a horizontal field of ice with minimal friction. A60Nforce is applied horizontally. If the child is initially at rest, how fast will he/she be going at...
-
A silicon diode for which n=2 operates at 5mA with a drop of 0.69V from a high-resistance source. What is its incremental resistance rd.
-
Lets suppose that Tori is a consumer and is choosing between two products to buy. Tori can buy a candy bar for $1, or Tori can buy a donut for $2. Yes, Tori has a sweet tooth. If Tori has an amount...
-
Use beginner/intermediate C++ skills and such as (cout.cin case switch if/else statements.etc(if needed)) If there are 91 days in any of the four seasons of a year for simplicity and the first season...
-
Explain how the graph of each function can be obtained from the graph of y = 1/x or y = 1/x 2 . Then graph f and give the (a) Domain (b) Range. Determine the largest open intervals of the domain over...
-
The McMillan Newspaper Company sometimes makes printing errors in its advertising and is forced to provide corrected advertising in the next issue of the paper. The managing editor has done a study...
-
Consider the following discrete probability distribution: x P(x) 5..0.10 10..0.15 15..0.25 20..0.50 a. Calculate the expected value of the random variable. b. Let y = x + 5. Calculate the expected...
-
A survey is conducted from a population of people of whom 40% have a college degree. The following sample data were recorded for a question asked of each person sampled, "Do you have a college...
-
The following is the trial balance of Sangeeta Udhyog Ltd. as on 31st March 2006. Further information 1.The authorised share capital of the company consists of 4,00,000 equity shares of ` 10 each. 2....
-
The accountant of Pushpa Engineering Company Ltd. has prepared the following trial balance of the company as on 31st March, 2006. Further information 1. Authorised equity share capital of the company...
-
Following trial balance as at 31st March 2006 has been prepared from the account books of Mahesh Foods Ltd. Further information 1.The authorized capital of the company is 3 lac equity shares of ` 10...
Study smarter with the SolutionInn App