(a) Wally has provided the information below and asked you to create an Income Statement and Balance Sheet for AndrewCo for the year ended December 31, 2019. (Income Statement = 5 marks and Balance Sheet = 7.5 marks).

I. Sales were $1,200,000

II. Gross profit margin was 50%

III. Operating margins were 10%

IV. The Bank of Toronto provided a loan on Jan 1, 2019 worth $300,000. The annual interest is 8% and is compounded annually. Interest only payments are needed until the loan is due in 10 years, where a balloon payment for the full balance must be paid.

V. The combined federal and provincial tax rates is 25%

VI. Wally knows that the ending cash balance in his company is 200,000.

VII. Accounts Receivables is 12% of sales

VIII. Inventory is 15% of sales

IX. Accounts Payable is 5% of sales

X. Accrued expenses payable is 5.5% of sales

XI. Capital equipment purchases were made at the start of the year. These total $50,000. These depreciate at 10% per year

XII. The owner will provide all other capital in the form of equity financing

XIII. Wally has asked you to figure out his SG&A (Selling General and Administrative expenses).

(b) Wally asks you to create an Income Statement for 2020 using the information below (5 marks)

I. 2020 sales were 150% of last years sales

II. Gross profit margin was 55%

III. Operating profit margins were 15%

IV. Interest expense fell to 7%, given a change in interest rates

V. The tax rate was 30%

(c) Based on the change in Income between 2020 and 2019, how would you say AndrewCo is doing? (2.5 marks)