BCO123  Accounting Paper- John Delivery services Ltd

This BCO123 Accounting Paper is also based on John Delivery services Ltd. The paper further explains the delivery of merchandises purchased online.

BCO123 Accounting Paper- John Delivery services Ltd

You must answer all the questions in the proposed business case.

Formalities:

Submission file format: Excel document with all the answers, clearly identifying all steps, results, journals and including comments besides each answer.

John Delivery services Ltd. Is a company dedicated to the delivery of merchandises purchased online

The company started the year 2019 with a total fleet of 5 cars purchased on 1st of January 2018 for a total amount of € 100,000 and 3 trucks purchased on 1st of January 2017 for a total amount of 180,000€. All cars have an estimated useful life of 5 years whereas trucks have an estimated useful life of 6 years. All vehicles have a salvage value of 10% of its cost. The depreciation method is the straight line method.

At 1st of January 2019 the accountant of the company realized that the useful life of the trucks should be lowered to 5 years in total taking into account the intensive use made of the vehicles.

BCO123 Accounting Paper- John Delivery services Ltd

In order to be able to respond to the dramatic increase of job orders from the main clients, the company decides on 1st of March to acquire 10 new trucks for a total amount of € 500.000. The trucks will have a useful life of 5 years, and an estimated salvage value of 10%. The accountant of the company decided that the depreciation method should be the 200% declining balance method.

To finance this acquisition, the company will issue 50.000 preferred stocks with €10 par value and 11% dividend rate.

At 1st of January 2019, the owner’s equity section of the balance sheet of the company was composed as follows:

  • Common stock: 100,000 shares of 1 € par value common stock
  • Additional paid in Capital Common stock: € 150.000
  • Retained earnings: €50.000

The 1st of April 2019, a tornado destroyed part of the company’s facilities, causing a total loss of € 57.000

On 1st of June 2019, John, a shareholder of the company decided to sale his 10% stake into the company. The company proceeded to the purchase of its own shares at a price per share of €10, a price 4 € above the market price.

BCO123 Accounting Paper- John Delivery services Ltd

To finance this purchase the company took a 6% loan of €100,000. Interests are payable once a year every 1st of June

During year 2019, the remaining expenses of the company were the following:

Labor costs:

  • 26 drivers with an average salary of €2.100 / month. 12 of said drivers where hired on 1st of March 2019 , plus 30% social security taxes payable the 15 first days following each month
  • 1 Manager with a gross fixed salary of €60.000 / year plus 30% social security taxes payable the 15 first days following each month, and a bonus of 5% of the net income of the previous year.
  • 3 mechanics with an average salary of €1.850 / month

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Reference no: EM132069492

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