NUNU is the sole importer of HI-TECH play robots into the European Union, purchased from a Japanese producer and resold to local toy stores. The balance sheet of NUNU as of 1 January 2X20 is as follows.

Detail information concerning the opening Balance sheet 01/01/2X20:

Inventory consists of 800 pieces of merchandise purchased in 2X19 for a price of 400/piece

Receivables consist of a gross amount 275,000 owed by customers, reduced by the estimated uncollectible amounts (12% of the outstanding receivables, i.e., 33,000)

Detail information about all transactions occurring during 2X20

1. Bank loan

On 2 January 2X20, a 5-year bank loan was originated at a total amount of 40,000. At the end of each year (i.e., on 31 December 2X20, 2X21, 2X22, 2X23 and 2X24), the company must repay onefifth of the loan (i.e., 8,000) plus accrued interest on the loan, equivalent to 8% of the outstanding balance as at the beginning of the year.

2. Tangible assets

The loan is used to purchase a new truck to deliver robots to customers. The expected useful life of the truck is 10 years; then, it will be sold at the secondhand market. The estimated selling price at the time of disposal is to be 5,000. The truck is purchased on 5 January 2X20 and has run sincethen.

3. Inventory and sales

Information on purchases1 and sales of merchandise:

January: purchase of 800 pieces for 452/piece

February to September: sales of 1,000 pieces for 840,000 in total

October: purchase of 400 pieces for 460/piece

November to December: sales of 500 pieces for 410,000 in total

Information on payments from customers:

All customers with due payments at the beginning of the year have paid except for one, owing 40,000, who went bankrupt

NUNU received 235,000 and the remaining 40,000 had to be written off.

At the year-end, there are outstanding receivables of 300,000 related to sales in 2X20. Based on its experience, NUNU estimates that 12% of the closing balance of trade receivables will never be collected.

Information on payments to suppliers:

January purchase of inventory has been paid to the supplier; the purchase made in October is due in February 2X21, and the payment has not been done yet.

4. Rental

In January 2X20, NUNU paid rental for administrative offices. The contract is effective from July 2X20 to June 2X21, and the total amount paid for the offices is 48,000. Furthermore, effective July 2X20, NUNU enters another lease contract, renting space for its newly opened store. The rental of 27,000 covering the period July 2X20 to June 2X01 is payable in June 2X21.

5. Dividend distributions

On 20 August 2X20, the General Meeting of shareholders decided that dividends of 50,000 would be distributed to owners. As of 31 December 2X20, 42,000 was already paid, remaining 8,000 is due next year.

6. Employees

The total salaries in 2X20 are 54,000 for selling staff and 66,000 for management and other administrative staff. Unpaid balance as of 31 December 2X20 is 14,000 (to be paid in January 2X21)

7. Insurance

Each January, NUNU pays 2,500 insurance fee covering its responsibility obligations to third parties. A NUNUs driver destroyed the customers entrance gate when delivering robots to one store. The partner replaced the gate for 6,000 and invoiced this amount to NUNU (NUNU paid in November 2X21). The insurance company has not confirmed the amount of coverage yet; according to contract terms, it should be 90%.

8. Income tax

The companys tax advisor has prepared the taxfilling (tax-return), according to which income tax expense for 2X20 is, after adjusting accounting profit for all non-deductible expenses and nontaxable income, 26,000. Liability is payable on 1 April 2X21; NUNU has made advance payments of 20,000 during 2X20.

Tasks required: Financial statements

1. Account for all transactions described above. Select an appropriate accounting policy and describe it explicitly in your solution when necessary. In case of a shortage of cash, NUNU has an agreement with its bank allowing NUNU to overdraw its bank account.

2. Prepare the Balance sheet statement and Income statement of NUNU as of 31 December 2X20 following generally accepted accounting principles.

\begin{tabular}{|l|l|l|l|} \hline \multicolumn{5}{|l|}{ NUNU Balance sheet 01/01/2X20 in } & \multicolumn{2}{l|}{} \\ \hline Inventory & 320,000 & Share capital & 660,000 \\ \hline Receivables & 242,000 & Retained earnings & 340,000 \\ \hline Cash & 438,000 & & \\ \hline Total assets & 1,000,000 & Total equity \& liabilities & 1,000,000 \\ \hline \end{tabular}