You were provided with the following balance sheet for Golden Cup firm for the year ended Dec
Question:
You were provided with the following balance sheet for Golden Cup firm for the year ended Dec 31st, 2018.
Consolidated Balance sheet Golden Cup. As of Dec 31st, 2018 | |||
Assets | Liabilities + Owners Equity | ||
Current Assets |
| Current Liabilities |
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Cash | 40,000 | Accounts Payable | 12,000 |
Accounts Receivables | 4,000 | Notes Payable | 6,000 |
Inventory | 14,000 | Accrue Wages | 1000 |
Total Current Assets | 58,000 | Total Current Liabilities | 19,000 |
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Fixed Assets |
| Long term debt | 40,000 |
Property, Plant, and Equipment | 56,000 |
Owners’ equity |
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Goodwill | 24,000 | Common Shares | 40,000 |
Total Fixed Assets | 80,000 | Retained Earnings | 39,000 |
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| Total Owners equity | 79,000 |
Total Assets | 138,000 | Liabilities + O.E | 138,000 |
In addition to that, you know the following facts about firm’s operations throughout the year:
- Golden Cup revenues for the year includes the following: Domestic revenues $160,000. International revenues $80,000. Out of Golden Cup’s sales, cost of sales and direct labor is 50% of annual revenues.
- Because of the strong competition that it faces, Golden Cup has a generous marketing plan. Golden Cup signed a contract with the marketing planet Inc. by which the marketing agency will be responsible for Golden Cup marketing for five years period started this year. The contract costs Golden Cup $100,000 that were paid up front, however the company thinks this plan will affect its sales evenly over the five years period. Golden Cup also spends $30,000 in the form of general and administrative expenses per year. Golden Cup depreciable assets historical value is $40,000 and is depreciated on a straight line basis over 10 years.
- Golden Cup pays interest rate of 10% on its Long-term debt outstanding.
- Out of the year’s net income, Golden Cup is planning to repay $30,000 to its shareholders in the form of cash dividends. The company currently has 60,000 shares outstanding
Question 1
a- Please set up income statement for Golden Cup:
Consolidated Income Statement Golden Cup. As of Dec 31st, 2018 |
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| Show your workings here | Final answer here |
Revenues |
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(-) Cost of goods sold |
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Gross margin |
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(-) Marketing expenses |
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(-) General and administrative expenses |
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(-) Depreciation |
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EBIT |
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(-) Interest expenses |
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EBT |
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(-) Tax expenses |
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Net income |
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Dividends |
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Additions to Retained Earnings |
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Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak