Question
EcoPak Ltd is a small private company, specialising in the manufacture of takeaway packaging, which offers an environmentally friendly alternative to disposable food containers. The
EcoPak Ltd is a small private company, specialising in the manufacture of takeaway packaging, which offers an environmentally friendly alternative to disposable food containers. The businesss accountant Kate has prepared a draft version of EcoPaks Balance Sheet and Income Statement for the financial year ended 30 June 2020. Kate knows she has made several mistakes in classifying the elements of the Balance Sheet and Income Statement because the income statement shows EcoPak has made a loss and the Balance Sheet doesnt balance! Kates statements are shown below.
EcoPak Ltd - Draft Income Statement for the year ended 30 June 2020 | |
Cash at Bank | 255,000 |
Accrued Wages | 22,000 |
Gross profit | 277,000 |
Expenses |
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Bank Loan | 320,000 |
Interest expense | 27,000 |
Prepaid Rent | 3,600 |
Depreciation Expense | 43,000 |
Donations Expense | 12,000 |
Accounts Receivable | 14,000 |
Other expenses | 32,000 |
Earnings before interest and tax | -174,600 |
Accounts Payable | 22,000 |
Profit before tax | -196,600 |
Income tax expense | 125,000 |
Profit for the period from continuing operations | -321,600 |
EcoPak Ltd Draft Balance Sheet AS AT 30 June 2020 | |||
Assets | Liabilities | ||
Current Assets | Current Liabilities | ||
Wages Expense | 78,000 | Drawings | -25,000 |
Cost of Sales | 376,000 | Inventory | 108,000 |
Rent Expense | 31,200 | Electricity expense | 18,000 |
Sales revenue | 1,244,000 | Non-current liabilities | |
Prepaid Utilities | 2,100 | Trucks | 90,000 |
Property Plant and Equipment | 578,000 | Advertising Expense | 45,000 |
Non-current Assets |
| Total Liabilities | 236,000 |
Retained Profits | 468,700 | Owners Equity |
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Mortgage | 63,000 | Insurance Expense | 72,000 |
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| Contributions | 198,000 |
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| Intangibles | 18,000 |
| Total Owners Equity | 288,000 | |
Total Assets | 2,841,000 | Total Liabilities and Owners Equity | 524,000 |
EcoPak Ltd CORRECTED Draft Income Statement for the year ended 30 June 2020 (3 marks) | |
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Gross profit |
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Expenses | |
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Earnings before interest and tax |
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Profit before tax |
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Profit for the period from continuing operations |
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EcoPak Ltd Draft Balance Sheet AS AT 30 June 2020 | |||
Assets | Liabilities | ||
Current Assets | Current Liabilities | ||
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Non-current Assets |
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| Owners Equity |
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| Total Owners Equity |
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Total Assets |
| Total Liabilities and Owners Equity |
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