Galaxy Productions’ fiscal year ended 31 December 2019. Their net profit was $2,796, the firms’ equity (new capital) was reduced from $50,000 to $32,796. The was also selling merchandises as part of their revenue. The firm bought a lighting machine for $8,000 in 2017, which has a lifespan of 4 years and its residual value was $500. The firm used the reducing balance method for depreciation. The firm has used Average Costing Method (AVCO) to obtain the closing stock which valued as $296.

The firm’s transactions are listed as follows:
Sales..................................................................... $ 30,000.00
Opening stock .....................................................$ 2,000.00
Wages and salaries .............................................$ 9,200.00
Purchases ............................................................$ 10,000.00
Overheads (inclusive of depreciation) ..............$ 6,300.00
Lighting Machine (after depreciation) ...............$ 2,000.00
Premise .................................................................$ 100,000.00
Short-term loan ....................................................$ 1,000.00
Bank ......................................................................$ 2,000.00
Payables ...............................................................$ 2,000.00
Receivables ...........................................................$ 1,500.00
Capital.................................................................... $ 50,000.00
Drawings ................................................................$ 20,000.00
Long term loan .......................................................$ 70,000.00
Movement of the Inventory

Bought Sold

Jan 2019 5 Boxes $60 each May 2019 4 Boxes $4,500 each
Apr 2019 5 Boxes $68 each Nov 2019 12 Boxes $1,000 each
Oct 2019 10 Boxes $80 each

Instructions

(i) Show the income statement and balance sheet with the data above.
(ii) You are now tasked to use another depreciation and stock valuation method other than what was used before and show a higher net profit in the income statement and higher equity in the balance sheet.
(iii) You are to do a new income statement and balance sheet and display both income statements and balance sheet (old and new) for comparison.

Answer rating: 100% (QA)

Income statement op stock 2000 sales 30000 purchase 10000 closing stock 2960 wages and s... View the full answer