MAKE OR BREAK IT IN THE PLASTICS INDUSTRY

History:

The company began operations in Windsor Ontario in 2000 as a try out facility and then in 2002 began producing parts and became a full injection molder. The company has 13 presses ranging from 100T to 3500T. They do work for the automotive and non- automotive industry. The make-up is 85% automotive and 15% non-automotive.

In 2008 the company was almost bankrupt because of the financial crisis. All work was terminated. George Wufski did not get paid for 2 years after the meltdown. George and Zippo lent additional monies through shareholder loans to help the company and Jeff bought the shares of one shareholder who left during the financial difficulties. Ownership is a group of 5 individuals who have many years of experience in the industry. George Wufski owns 53% of the company, and his son Jeff Wufski owns 8%, Zippo Maskue owns 14%, Angelo Bassimo owns 17%, and Ralph Usar owns 8%, he is an American citizen.

George is 70 years old. Jeff is 32 years old with a spouse who is a medical doctor.

Zippo is 52 years old, with spouse owns the shares and does not like to sign any documents.

Angelo is 56 years old, and his spouse owns the shares. They have had medical issues and financial problems.

Ralph is 54 years old, and his wife owns the shares. She is a constant problem with the ownership and refuses to sign any legal documents.

Wuf Plastics Inc. makes several plastic products for the automotive industry. The previous two years of statements are provided for reference as Exhibit 1. You will also find a trial balance sheet for the current year as Exhibit 2. Exhibit 3 are notes from the financial statements. The company has brought in their accounting firm, PITS LLP Charted Accountants (PITS) to look at their books. The reason is their bank DesFlowers Credit Union, (DCU), is concerned.

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Current Environment:

The company is still struggling with the slowdown due to COVID-19, and in addition the industry constraints on material have put significant pressure on the companys viability. Manufacturers of the resin which is a key ingredient in plastic injection molding have instituted a force majeure, which has made the company buy inventory in advance due to potential shortages. Another factor is chip shortages which effects the company indirectly as parts are not being made for the cars until the companies can secure the necessary chips to produce a full vehicle. These delays cause significant problems in their expected sales versus actual sales.

Summary:

Angie Habs, the principal at PITS has asked you, Newbie Accountant to put together the Balance Sheet and Income Statement for the current year. This company is a private enterprise and has chosen to use ASPE rules. Once you have completed the statements then use that information to compare to the previous years to determine what types of issues Wuz Inc. is having and what are some potential solutions to the company. In addition you need to use financial evaluation tools you were taught in your final class, BSMM 8110 to support your identification of issues and solutions.

Exhibit 1

Current Assets

2020

2019

Cash and cash equivalents Accounts Receivable Government Remittances Recoverable Inventory 525,144

Notes Current Assets Cash and short term investments $

Notes

-

Prepaid expenses and deposits

Total Current Assets

Property Plant and Equipment - Net Due from Related Parties Investments

58,514

1,947,149

2,283,304 879,691 1

7,860

5,118,004

- 418,337 31,277 -

- 2 43,722

699,945

1,193,281

773,831 38,515 968,359

1,780,705

2,973,986

300 2,143,718

2,144,018

5,118,004

Prepaid expenses and deposits

Total Current Assets

Property Plant and Equipment - Net Due from Related Parties Investments

Total Assets

Current Liabilities

Bank operating line Accounts payable Government Remittances Payable Unearned Revenue Taxes Payable Current Portion of Capital Leases Current Portion of Long Term Debt

Total Current Liabilities

Long Term Debt

Equipment loans Capital Leases Due To Shareholders

Total Long Term Debt Total Liabilities

Share Capital

Retained Earnings

Total Shareholders Equity Total Liabilities and Equity

9,763

2,382,809

2,554,924 497,152 1

7,813

$ 5,442,698

Wuf Plastics Inc. Balance Sheet as at September 30, 2020

$

514,192

697,236 152,063

Accounts Receivable Foreign Exchange Receivable Inventory 472,751

1,794,283 106,012

Total Assets $

Current Liabilities

Bank operating line Accounts payable Government Remittances Payable Unearned Revenue Taxes Payable Current Portion of Capital Leases Current Portion of Long Term Debt

Total Current Liabilities

Long Term Debt

Equipment loans Capital Lease Due To Shareholders

Total Long Term Debt

Total Liabilities

Shareholders Equity

Share Capital

Retained Earnings

Total Shareholders Equity

Total Liabilities and Equity $

$ $

$ $

131,707 1,021,787 0 184,010

3,744 2 34,718

348,959

1,724,925

655,620 70,308 968,359

1,694,287

3,419,212

300 2,023,186

2,023,486

5,442,698

$

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Revenue

Revenue Other Revenue Total

Cost of Goods Sold

Material Labour Repairs and Maintenance Total Direct Cost

Gross Profit

Administrative and General Expenses

Marketing Automotive & Travel Expenses Bad Debt Interest and bank charges Insurance/Benefits Interest on long-term debt Interest on capital lease obligations Office Professional Fees Rent Utilities Amortization Total Expenses

Net Income before Other Items

Interest Income Foreign Exchange Gain Loss on sale of Capital Assets Net Income Before Taxes Provision for Taxes

Netincome

Notes Revenue Revenue

Other Revenue

Total

Cost of Goods Sold

Material Labour Repairs and Maintenance Total Direct Cost

Gross Profit

Administrative and General Expenses

Marketing Automotive & Travel Expenses Bad Debt Interest and bank charges Insurance/Benefits Interest on long-term debt Interest on capital lease obligations Office Professional Fees Rent Utilities Amortization Total Expenses

Net Income before Other Items

Interest Income Foreign Exchange Gain Loss on sale of Capital Assets Net Income Before Taxes Provision for Taxes

Netincome

Notes

Wuf Plastics Inc. Income Statement for the year-ended September 30, 2020

$ $

$

$ $ $

$

$

5,054,877 549,235 3

$ 6,972,673 $ 1,254,653 3

$ 8,227,326

$ 3,834,659 2,016,451 162,850

$ 6,013,960

$ 2,213,366

8,332 39,393 15,740 13,430

190,379 52,753 3,823 126,762 97,165 160,000 273,962 340,569

2020

2019

$

$

$

$

5,604,112

2,996,788 1,346,373 112,280

4,455,441

1,148,671

1,522 33,411

(7,725) 9,274 143,341 48,235 4,308 86,406 148,034 100,000 269,887 303,179

1,139,872

8,799

4,196 131,177

144,172

23,640

120,532

$

$ 1,322,308

$

$

$

$

$

891,058

3,403 58,941

(6,796)

946,606

160,050

786,556

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Exhibit 2

Account No. Account Description Debits

Credits

Wuf Plastics Inc. Trial Balance As at 05/31/2021

1010 Bank - TDCT (CDN) 0.00 0.00 1020 Bank - HSBC 0.00 0.00 1030 Desflowers Share Account 5.00 0.00 1060 Petty Cash 30.10 0.00 1063 Desflowers Credit Union 30,407.00 0.00 1100 Investments 0.00 0.00 1200 Accounts Receivable 920,561.02 0.00 1205 Allowance for Doubtful Accounts 0.00 0.00 1220 Payroll Advances 0.00 0.00 1310 Prepaid Deposits 670.04 0.00 1320 Prepaid Deposits - Utilities 1,853.63 0.00 1325 Prepaid Expense 44,511.13 0.00 1520 Inventory 441,005.00 0.00 1580 Finished Goods Inventory 4,120.00 0.00 1611 Related Party Loan USD 1,525,367.83 0.00 1612 FX on related party loan 462,857.17 0.00 1820 Equipment 2,488,325.76 0.00 1821 Amortization Equipment 0.00 755,321.12 1830 Machinery - Cranes 500,327.51 0.00 1831 Amortization - Cranes 0.00 262,093.26 1834 Machinery 1,016,714.27 0.00 1835 Amortization Machinery 0.00 443,528.56 1888 Acc. Amort.-Ass. under capital leas 0.00 11,471.60 1889 Assets Under Capital Leases 40,970.00 0.00 1935 Investment in Other Company 5,600.00 0.00 1945 Foreign Exchange in Investment 1,960.00 0.00 2100 Accounts Payable 0.00 438,862.00 2126 Term Loan 1 0.00 1,250,141.00 2127 Term Loan 2 0.00 761,617.00 2128 Capital Lease 0.00 22,189.00 2129 LOC Desflowers 0.00 640,000.00 2130 Taxes Payable 39,084.00 0.00 2178 Current Portion of Loan 0.00 30,000.00 2179 Current Portion of Capital Lease 0.00 9,000.00 2681 Shareholder A 0.00 82,723.68 2682 Shareholder B 0.00 436,559.91 2683 Shareholder C 0.00 57,340.87 2684 Shareholder D 0.00 144,864.11 2685 Shareholder E 0.00 246,870.00 3350 Common Shares/Share Capital 0.00 300.00 3560 Retained Earnings 0.00 2,143,718.00

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4200 Sales 4220 Sales Returns 4240 Sales Discounts 4310 Scrap Revenue 4330 Mold Revenue (New Molds) 4460 Misc Revenue 4461 Interest Income 5010 Raw Material (Resin) 5122 Resin bought from Flos 5410 Wages & Salaries 5412 Management Wages 5415 Wage Subsidies 5610 Accounting & Legal 5612 Consultant/Professional 5615 Marketing 5620 Bad Debts 5640 Office 5650 Currency Exchange & Rounding 5660 Amortization Expense 5680 Income Taxes 5685 Insurance 5686 Benefits 5687 Bank Charges 5690 Interest & Bank Charges 5691 Interest paid on Capital Lease 5762 Repairs & Maintenance 5770 Equipment Rental 5778 Car Expense 5790 Utilities 5792 Rent 5820 Gain disposition of capital assets 5998 Ask My Accountant

0.00 2,385,103.40 0.00 0.00 0.00 0.00 0.00 31,407.77 0.00 220,718.54 0.00 41,541.69 0.00 169.00

557,230.23 0.00

227,390.67 0.00 1,001,099.90 0.00 547,348.71 0.00 0.00 512,008.31 0.00 0.00 97,564.00 0.00 2,526.29 0.00 0.00 0.00 128,756.00 0.00 78,784.12 0.00 224,000.00 0.00 0.00 39,084.00 84,043.40 0.00 33,998.73 0.00 6,800.01 0.00 40,775.71 0.00 3,908.00 0.00 91,592.02 0.00 0.00 0.00 19,315.23 0.00 190,463.80 0.00 106,666.54 0.00 0.00 0.00 0.00 0.00

10,966,632.82 10,966,632.82

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Exhibit 3

1. DuefromRelatedpartiesandforeignexchange(FX) 2. Taxes Payable at a rate of 15.5% for Income under $500,000 3. OtherRevenue:consistsofscraprevenue,miscellaneousrevenue,feesandnewmolds.

Other Expenses: include building of molds, and general expenses