Question 1 Fashion Rave Clothing is a sole proprietorship enterprise, which is owned legally by a single individual - Rover Heritage. The purpose of Fashion Rave Clothing as a business is to own and operate clothing/merchandise stores. It is like a department store chain, selling men's, women's, and children's clothing and other related items. Fashion Rave Clothing prides itself on selling sophisticated clothing and is in the city, and they have a staff of 10 people employed in their stores. Fashion Rave Clothing needs to calculate depreciation. As a company, they have long-term assets such as buildings, equipment, motor vehicle, among others. These assets are used over multiple periods and they need to allocate the cost of those assets over those multiple usage periods. This allows them to achieve the act of the matching of cost and benefits. They are matching the cost of the asset through depreciation expense, and the benefit being received through revenue - in other words, matching expense with revenue. Fashion Rave Clothing has the following information (table 1 below) for its Building and Equipment: Building and Equipment Details Cost $ 500.000 Residual 0 Useful Life 30 years Table 1 Additionally, Fashion Rave Clothing has the following total figures for Debtors at the end of each financial year (table 2 below). The Provision for Doubtful Debts is to be maintained at 3% of debtors at the year-end. Assuming no provision had previously existed. Year ended December 31 2017 2018 2019 Table 2 Value of debtors (S) 7,000 8.500 8,000 INOX The Council of Community Colleges of Jamaica Page ACCTIMO Furthermore, Fashion Rave Clothing had the following information: i. Rates Receivables: Owing at 1 January 2019 $108; Paid during financial year $644; Owing at 31 December 2019 $152. ii. Motor Expenses; Owing at 1 January 2019 $64; Paid during financial year $308; Prepaid at 31 December 2019 $24. The financial year of Fashion Rave Clothing ended on 31st December 2019. You are required to answer the following questions: A. Show the ledger accounts for Rates Receivables and Motor Expenses including the balance transferred to the necessary part of the financial statements, also the balance carned down to the following year. (6 marks) B Construct the Provision for Doubtful Debts Account for 2017. 2018 and 2019 11. Show the relevant entries on the Profit and Loss Account for the year ended 31 December 2017 2018 and 2019. in Show the Debtors on Balance Sheet extracts as at 31 December 2047, 2018 and 2019, 19 marks) There are several methods that can be used to calculate depreciation. Clearly explain the method of depreciation that would be most suitable for Fashion Rave Clothing to use (5 marks) (Total 20 marks)
