Question 1

Below is a list of the general ledger account totals from the trial balance at the end of 2020 for the business.

Name of Account Dr Cr

Cash ?

Inventory 15,000

Accounts Receivable ?

Prepaid Lease 0

Property Plant & Equipment ?

Accumulated Depreciation ?

Suppliers Accounts Payable 24,000

Taxes Payable 0

Interest Only Bank Loan 50,000

Contributed Capital 10,000

Retained Earnings ?

Credit Sales 170,000

Cash Sales 30,000

Cost of Goods Sold 88,000

Wages Expense 25,000

Lease Expense 8,000

Utilities Expenses 5,000

Interest on Bank Loan 3,000

Dividends Paid 50,000

Except for the cost of goods sold and new taxes, assume that all expenses are paid for in cash. The business had new equipment purchases during 2020 of $5,000 and depreciation on all property, plant & equipment is calculated using the reducing balance method with an annual depreciation rate of 30%.

Question 1 continued.

2. If the business pays a flat tax rate of 24%, construct a Statement of Financial Performance for the business for 2020 showing: (6 marks)

i) gross profit ii) operating profit iii) net profit after tax