QUESTION 1 [20 marks] ‘Best Advice for You Ltd.’ was launched on 1 January, Year 1, offering consulting services. Shareholders contributed £160,000 to the business and the business further arranged a bank overdraft (initially f320,000). All of these funds were used to buy cars for trips to clients, to lease an office and to hire assistants. The business’ opening balances were: Best Advice for You Ltd. Trial Balance as at 01.01.1 Dr Cr Fixed assets 480,000 Bank overdraft 320,000 Share capital 160,000 480,000 480,000 Best Advice for You Ltd.’ engaged in the following transactions during its first year of trading (all transactions in f000, all cash transactions conducted via the overdrawn bank current account): l. Bills totalling 2,400 were sent to clients. 2. 1,600 was received from those clients. 3. 2,000 was paid in operating expenses (including salaries to the assistants, computer hire, online information services, etc.) 4. A bill was received for 200, for office rent for Year 1, payable in arrears in January, Year 2. 5. Depreciation on company cars was taken into consideration (assuming straight- line method, 10 years of useful economic life and f80,000 of residual value). 6. Bank interest of 140 was paid. Show transcribed image text QUESTION 1 [20 marks] ‘Best Advice for You Ltd.’ was launched on 1 January, Year 1, offering consulting services. Shareholders contributed £160,000 to the business and the business further arranged a bank overdraft (initially f320,000). All of these funds were used to buy cars for trips to clients, to lease an office and to hire assistants. The business’ opening balances were: Best Advice for You Ltd. Trial Balance as at 01.01.1 Dr Cr Fixed assets 480,000 Bank overdraft 320,000 Share capital 160,000 480,000 480,000 Best Advice for You Ltd.’ engaged in the following transactions during its first year of trading (all transactions in f000, all cash transactions conducted via the overdrawn bank current account): l. Bills totalling 2,400 were sent to clients. 2. 1,600 was received from those clients. 3. 2,000 was paid in operating expenses (including salaries to the assistants, computer hire, online information services, etc.) 4. A bill was received for 200, for office rent for Year 1, payable in arrears in January, Year 2. 5. Depreciation on company cars was taken into consideration (assuming straight- line method, 10 years of useful economic life and f80,000 of residual value). 6. Bank interest of 140 was paid.
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