Stand Inc. is a federally incorporated Canadian company based in Ottawa, specialized in developing, manufacturing and servicing multifunctional adjustable stands for laptops, tablets, books and smartphones to avoid neck pains and back pains caused by the long view down when using laptops, tablets, books or smartphones. In 2020 Stand Inc. sold 50 000 units of multifunctional stands at $20 each and spent $100 000 and $10 000 for raw material and transportation respectively. The amount of $250 000 was used for the salary of production workers while $200 000 was used for administration salary. For electricity and heating, Stand Inc. spent $15 000 and paid $75 000 as loan interest of the money borrowed. The company earned 2.5% as interest on an investment of $200 000 made and also spent $3 000 and $2 000 for marketing and trade fair respectively. The machine depreciation allowance was $50 000 and the tax rate of the company was 25%. Some data of the annual financial journal of the company in 2020 are shown in the table below.

1. Classify the different costs of the company in 2020 in terms of material costs, labour costs, overhead, special cost and specify if each basic cost is variable, fixed, direct or indirect. (2.5 marks)

2. Produce the income statement of the company in 2020. (2.5 marks)

3. Based on the information provided in this financial journal, produce the balance sheet of the company. (5 marks)

4. Based on the income statement and balance sheet of the company in 2020, generate the cash flow statement of the company in 2020. (2 marks)

5. Assuming that the machine depreciation allowance is the first-year depreciation cost of the production machine, calculate the value of the production machine at the end of year 3. (2 marks)

6. How many stands should sell the company to break even the total cost of $780 000 if the unit sales price of stands can increase or decrease by 25%? (2 marks)

7. As business manager of a company providing technical consulting services to Stand Inc., you come up with an idea to increase the profit of your company by offering flexible payment options to your customers:

   1. Option A is a single upfront payment of $2 000.

   2. Option B is a monthly payment for 2 years.

   3. Option C is a monthly payment for 3 years.

Assuming an annual interest rate of 3% during the payment periods, determine the minimum monthly payment customers are required to pay in options B and C. (4 marks)

2 # 1 2 3 4 5 6 7 8 9 10 Stand Inc. Annual Financial Journal 2020 Description Amount Equipment loan $350 000 Cash $50 000 Account receivable $20 000 Inventories $100 000 Mortgage loan $30 000 Building $100 000 Production machine $500 000 Account payable $100 000 Land acquired $80 000 Machine depreciation $50 000 allowance Dividends payable $20 000 11 2 # 1 2 3 4 5 6 7 8 9 10 Stand Inc. Annual Financial Journal 2020 Description Amount Equipment loan $350 000 Cash $50 000 Account receivable $20 000 Inventories $100 000 Mortgage loan $30 000 Building $100 000 Production machine $500 000 Account payable $100 000 Land acquired $80 000 Machine depreciation $50 000 allowance Dividends payable $20 000 11