Financial Information for Decision Making – Global Homework Experts

QUESTION 1

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Alex Au is the owner and manager of Titan Hardware, a hardware store located in the city of Europa.

All sales are on credit terms and are made to business establishments only. A gross profit margin of 20% is earned on all sales. Payments are received in the month following the sales, and any uncollected amounts at that point are treated as bad debts.

QUESTION 2

Bach and Chopin are managers of Callisto Music Ltd, a business located in the city of Europa selling musical instruments.

The company began the financial year ended 30 June 2022 with a Cash at Bank balance of $47,000.

During the financial year ended 30 June 2022:

The owners of Callisto Music Ltd doubled the company’s share capital to $180,000 as of 30 June 2022.

The company paid dividends of $10,000 to its shareholders.

Additional plant and equipment were acquired by cash. There were no disposals. In addition, all plants and equipment were depreciated using the straight-line method over their useful lives of 5 years with zero residual value.

Sales revenue was marked-up at 25% on the cost price of $620,000.

Interest earned and deposited into the company’s bank account was $3,000. In addition, the bank deducted $4,000 from the company’s bank account for interest charged on debentures taken up by the company.

$50,000 of the outstanding debenture from the previous financial year was paid, and a second debenture was obtained.

Profit before tax was $80,000. This amount was obtained after deducting operating expenses (excluding depreciation and all interest items) of $54,000.

The income tax rate is 30%, and all tax expenses have been paid to the Tax Office