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.
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