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. 21 pa e 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 company's 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 Wuf Plastics Inc. Balance Sheet as at September 30, 2020 2020 Current Assets Notes Current Assets Cash and cash equivalents $ 514,192 Cash and short term investments Accounts Receivable 697,236 Accounts Recchable Government Remittances Recoverable 152,063 Foreign Exchange Reecivable Inventory 525,144 Inventory Prepaid expenses and deposits 58,514 Prepaid expenses and deposits Total Current Assets 1,947,149 Total Current Assets Property Plant and Equipment - Net 2,283,304 Property Plant and Equipment - Net Due from Related Parties 879,691 1 Due from Related Parties Investments 7,860 Investments Total Assets S 5,118,004 Total Assets 2019 Notes $ 1,794,283 106,012 472.751 9.763 2382,809 2,554,924 497,152 7,813 $5,442,698 $ 418,337 31,277 s $ 131,707 1,021,787 0 $ 184,010 3,744 2 34,718 348,959 1,724,925 2 43,722 699,945 1,193,281 Current Liabilities Bank operating line Accounts payable Government Remittances Payable Uneamed Revenue Taxes Payable Current Portion of Capital Leases Current Portion of Long Term Debt Total Current Liabilities Long Term Debt Equipment ans Capital .case Due To Shareholders Total Long Term Debt Total Liabilities Shareholders Equity Share Capital Retained Farings Total Shareholders Equity Total Liabilities and Equity Current Liabilities Bank operating line Accounts payable Government Remittances Payable Uneamed Revenue Taxes Payable Current Portion of Capital cases Current Portion of Long Term Debt Total Current Liabilities Long Term Debt Equipment kans Capital cases Due To Shareholders Total Long Term Debt Total Liabilities 773,831 38,515 968,359 1.780,705 655,620 70,308 968,359 1,694,287 2,973,986 3,419,212 300 2,143,718 2,144,018 S 5,118,004 Share Capital Retnined Farmings Total Shareholders Equity Total Liabilities and Equity 300 2,023,186 2,023, 486 $5,442,698 War Plastics Inc. Income Statement for the year-ended September 30, 2020 2020 Notes Revenue $ 5,054,877 Revenue s 549,235 3 Other Reven $ 5,604,112 Total Revenue Revenue Other Revenue Total 2019 Notes 56,972,673 $1.254,653 3 58227,326 Cost of Goods Sold Material Labour Repairs and Mainterne Total Direct Cost $3,834,639 2,016,451 162,850 $ 6,013,960 S 2,213,366 Cost of Goods Sold Material $ 2,996,788 Labour $ 1,346,373 Repairs and Maintenance s 112.280 Total Direct Cost S 4,455,441 Gross Profit $ 1.148,671 Administrative and General Expenses Marketing 1,522 Automotive & Travel Expenses 33,411 Bad Debt (7.725) Interest and bank charges 9,274 Insurance/Benefits 143.341 Interest on long-term debt 48,235 Interest on capital case obligations 4,308 Office 86,406 Professional Fees s 148,034 Rent 100,000 Utilities 269,887 Amortization 303,179 Total Expenses $ 1,139,872 Net Income before Other Items s 8,799 Interest Income 4.196 Foreign Exchange Gain 131,177 Loss on sale of Capital Assets Net Income Before Taxes 144,172 Provision for Taxes 23,640 Net income $ 120.532 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 lense obligations Office Professional Fees Rome Utilities Amortization Total Expenses Net Income before Other Items Interest Income Forcign Exchange Gain Loss on sak of Captal Assets Net Income Before Taxes Provision for Ties Net income 8,332 39,393 15,740 13.430 190,379 52,753 3,823 126,762 $ 97,165 160,000 273,962 340,569 $1,322,308 S891,058 3,403 58,941 $ (6,796) $ 946,606 $ 160,050 S 786,556 F 0.00 F Exhibit 2 War Plastics in Trial Balance As at 05312021 Account No. Account Description Debes 1010 Bank - IDCT (CUN) 0.00 1020 Bank - HSBC 0.00 1030 Desflowers Share Account 5.00 1060 Petty Cash 30.10 1063 Deslowers Credit Union 30,407.00 1100 Investments 0.00 1200 Accounts Receivable 920,561.00 1205 Allowance for Doubtful Account 1220 Payroll Advances 0.00 1310 Prepaid Deposits 670.04 1320 Prepaid Deposts - Utilities 1.853.63 1325 Prepaid Experie 44,511.13 1520 Inventory 441.005.00 1580 Finished Goods Inventory 4.120.00 1611 Related Party Loan USD 1,525,367.83 1612 FX on related party ban 462,857.17 1820 Equipment 2,488,325.76 1821 Amortintion Fiquipment 0.00 1830 Machinery - Chines 500,327.51 1831 Amortization - Cranes 0.00 1834 Machinery 1,016, 714.27 1835 Amortization Machinery 0.00 1888 Aee. Amort-Ass under capital 0.00 1889 Assets Under Capital.cases 40,970.00 1935 Investment in Other Company 5,600,00 1945 Forcign Exchange in Investment 1,960.00 2100 Accounts Payable 0.00 2126 Term Loan 1 0.00 2127 Term Loan 2 0.00 2128 Capital Lease 0.00 2129 LOC Desflowers 0.00 2130 Taves Payable 39,084.00 2178 Current Portion of Loan 0.00 2179 Current Portion of Capital Lease 0.00 2681 Shareholder A 0.00 2682 Shareholder B 0.00 2683 Shareholder 0.00 2684 Shareholder D 0.00 2685 Sharcholder E 0.00 3350 Common ShareShure Capial 0.00 3560 Retained Famings 0.00 Credits 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 755,321.12 0.00 262.093.26 0.00 443.528.56 11,471.60 0.00 0.00 0.00 438,862.00 1,250.141.00 761,617.00 22,189.00 640,000.00 0.00 30,000.00 9,000.00 82,723.68 436,559.91 57,340.87 144,864.11 246,870.00 300.00 2,143,718,00 F F F F F F F F 4200 Sales 4220 Sales Returns 4240 Sales Discounts 4310 Scrap Revenue 4330 Moll 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 0.00 0.00 0.00 0.00 0.00 0.00 557,230.23 227,390.67 1,001,099.90 547,348.71 0.00 0.00 97,564.00 2,526.29 0.00 128,756.00 78,784.12 224,000.00 0.00 84,043.40 33,998.73 6,800.01 40,775.71 3,908.00 91,592.02 0.00 19,315.23 190,463.80 106,666.54 0.00 0.00 2,385,103.40 0.00 0.00 31,407.77 220,718.54 41,541.69 169.00 0.00 0.00 0.00 0.00 512,008.31 0.00 0.00 0.00 0.00 0.00 0.00 0.00 39,084.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 F 10,966,632.82 10,966,632.82 Exhibit 3 Wuf Plasties Inc. Notes to Financial Statements 1. Due from Related parties and foreign exchange(FX) 2. Taxes Payable at a rate of 15.5% for Income under $500,000 3. Other Revenue: consists of scrap revenue miscellaneous revenue, fees and new molds. Other Expenses: include building of molds, and general expenses 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. 21 pa e 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 company's 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 Wuf Plastics Inc. Balance Sheet as at September 30, 2020 2020 Current Assets Notes Current Assets Cash and cash equivalents $ 514,192 Cash and short term investments Accounts Receivable 697,236 Accounts Recchable Government Remittances Recoverable 152,063 Foreign Exchange Reecivable Inventory 525,144 Inventory Prepaid expenses and deposits 58,514 Prepaid expenses and deposits Total Current Assets 1,947,149 Total Current Assets Property Plant and Equipment - Net 2,283,304 Property Plant and Equipment - Net Due from Related Parties 879,691 1 Due from Related Parties Investments 7,860 Investments Total Assets S 5,118,004 Total Assets 2019 Notes $ 1,794,283 106,012 472.751 9.763 2382,809 2,554,924 497,152 7,813 $5,442,698 $ 418,337 31,277 s $ 131,707 1,021,787 0 $ 184,010 3,744 2 34,718 348,959 1,724,925 2 43,722 699,945 1,193,281 Current Liabilities Bank operating line Accounts payable Government Remittances Payable Uneamed Revenue Taxes Payable Current Portion of Capital Leases Current Portion of Long Term Debt Total Current Liabilities Long Term Debt Equipment ans Capital .case Due To Shareholders Total Long Term Debt Total Liabilities Shareholders Equity Share Capital Retained Farings Total Shareholders Equity Total Liabilities and Equity Current Liabilities Bank operating line Accounts payable Government Remittances Payable Uneamed Revenue Taxes Payable Current Portion of Capital cases Current Portion of Long Term Debt Total Current Liabilities Long Term Debt Equipment kans Capital cases Due To Shareholders Total Long Term Debt Total Liabilities 773,831 38,515 968,359 1.780,705 655,620 70,308 968,359 1,694,287 2,973,986 3,419,212 300 2,143,718 2,144,018 S 5,118,004 Share Capital Retnined Farmings Total Shareholders Equity Total Liabilities and Equity 300 2,023,186 2,023, 486 $5,442,698 War Plastics Inc. Income Statement for the year-ended September 30, 2020 2020 Notes Revenue $ 5,054,877 Revenue s 549,235 3 Other Reven $ 5,604,112 Total Revenue Revenue Other Revenue Total 2019 Notes 56,972,673 $1.254,653 3 58227,326 Cost of Goods Sold Material Labour Repairs and Mainterne Total Direct Cost $3,834,639 2,016,451 162,850 $ 6,013,960 S 2,213,366 Cost of Goods Sold Material $ 2,996,788 Labour $ 1,346,373 Repairs and Maintenance s 112.280 Total Direct Cost S 4,455,441 Gross Profit $ 1.148,671 Administrative and General Expenses Marketing 1,522 Automotive & Travel Expenses 33,411 Bad Debt (7.725) Interest and bank charges 9,274 Insurance/Benefits 143.341 Interest on long-term debt 48,235 Interest on capital case obligations 4,308 Office 86,406 Professional Fees s 148,034 Rent 100,000 Utilities 269,887 Amortization 303,179 Total Expenses $ 1,139,872 Net Income before Other Items s 8,799 Interest Income 4.196 Foreign Exchange Gain 131,177 Loss on sale of Capital Assets Net Income Before Taxes 144,172 Provision for Taxes 23,640 Net income $ 120.532 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 lense obligations Office Professional Fees Rome Utilities Amortization Total Expenses Net Income before Other Items Interest Income Forcign Exchange Gain Loss on sak of Captal Assets Net Income Before Taxes Provision for Ties Net income 8,332 39,393 15,740 13.430 190,379 52,753 3,823 126,762 $ 97,165 160,000 273,962 340,569 $1,322,308 S891,058 3,403 58,941 $ (6,796) $ 946,606 $ 160,050 S 786,556 F 0.00 F Exhibit 2 War Plastics in Trial Balance As at 05312021 Account No. Account Description Debes 1010 Bank - IDCT (CUN) 0.00 1020 Bank - HSBC 0.00 1030 Desflowers Share Account 5.00 1060 Petty Cash 30.10 1063 Deslowers Credit Union 30,407.00 1100 Investments 0.00 1200 Accounts Receivable 920,561.00 1205 Allowance for Doubtful Account 1220 Payroll Advances 0.00 1310 Prepaid Deposits 670.04 1320 Prepaid Deposts - Utilities 1.853.63 1325 Prepaid Experie 44,511.13 1520 Inventory 441.005.00 1580 Finished Goods Inventory 4.120.00 1611 Related Party Loan USD 1,525,367.83 1612 FX on related party ban 462,857.17 1820 Equipment 2,488,325.76 1821 Amortintion Fiquipment 0.00 1830 Machinery - Chines 500,327.51 1831 Amortization - Cranes 0.00 1834 Machinery 1,016, 714.27 1835 Amortization Machinery 0.00 1888 Aee. Amort-Ass under capital 0.00 1889 Assets Under Capital.cases 40,970.00 1935 Investment in Other Company 5,600,00 1945 Forcign Exchange in Investment 1,960.00 2100 Accounts Payable 0.00 2126 Term Loan 1 0.00 2127 Term Loan 2 0.00 2128 Capital Lease 0.00 2129 LOC Desflowers 0.00 2130 Taves Payable 39,084.00 2178 Current Portion of Loan 0.00 2179 Current Portion of Capital Lease 0.00 2681 Shareholder A 0.00 2682 Shareholder B 0.00 2683 Shareholder 0.00 2684 Shareholder D 0.00 2685 Sharcholder E 0.00 3350 Common ShareShure Capial 0.00 3560 Retained Famings 0.00 Credits 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 755,321.12 0.00 262.093.26 0.00 443.528.56 11,471.60 0.00 0.00 0.00 438,862.00 1,250.141.00 761,617.00 22,189.00 640,000.00 0.00 30,000.00 9,000.00 82,723.68 436,559.91 57,340.87 144,864.11 246,870.00 300.00 2,143,718,00 F F F F F F F F 4200 Sales 4220 Sales Returns 4240 Sales Discounts 4310 Scrap Revenue 4330 Moll 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 0.00 0.00 0.00 0.00 0.00 0.00 557,230.23 227,390.67 1,001,099.90 547,348.71 0.00 0.00 97,564.00 2,526.29 0.00 128,756.00 78,784.12 224,000.00 0.00 84,043.40 33,998.73 6,800.01 40,775.71 3,908.00 91,592.02 0.00 19,315.23 190,463.80 106,666.54 0.00 0.00 2,385,103.40 0.00 0.00 31,407.77 220,718.54 41,541.69 169.00 0.00 0.00 0.00 0.00 512,008.31 0.00 0.00 0.00 0.00 0.00 0.00 0.00 39,084.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 F 10,966,632.82 10,966,632.82 Exhibit 3 Wuf Plasties Inc. Notes to Financial Statements 1. Due from Related parties and foreign exchange(FX) 2. Taxes Payable at a rate of 15.5% for Income under $500,000 3. Other Revenue: consists of scrap revenue miscellaneous revenue, fees and new molds. Other Expenses: include building of molds, and general expenses