Jane Bond just started selling gym elastic bands this year, alongside her online exercise sessions which she started two years ago. She enjoys the high profit margins this low-cost business generates for her. Her accountant has produced the Statement

  

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Jane Bond just started selling gym elastic bands this year, alongside her online exercise sessions which she started two years ago. She enjoys the high profit margins this low-cost business generates for her. Her accountant has produced the Statement of Financial Position (SOFP) for the year ended 31 December 2021 (with comparative figures from the year before) as well as details from her Cash Book for the year ended 31 December 2021. Jane would like you to use the information below to produce an Income Statement for her for the year ended 31 December 2021. Note: the 2021 data is in the left hand column. JB: Statement of Financial Position As At 31 December: Non-Current Assets Plant and Machinery Furniture and Fittings Current Assets Inventories Trade Receivables" Doubtful Debt Provision + Prepayment (Insurance) Bank Equity Proprietor's capital Retained Earnings Current Liabilities 2021- £* 450- 1,300 1,750- 500+ 400- 0+ 70+ 10,570 11,540 13,290- 2,000- 10,910- 12,910- 2020 500 1,500 2,000*** 400- 240- (30)*** 60 12,330 13,000 15,000- 2,000- 12,760 14,760- Jane Bond just started selling gym elastic bands this year, alongside her online exercise sessions which she started two years ago. She enjoys the high profit margins this low-cost business generates for her. Her accountant has produced the Statement of Financial Position (SOFP) for the year ended 31 December 2021 (with comparative figures from the year before) as well as details from her Cash Book for the year ended 31 December 2021. Jane would like you to use the information below to produce an Income Statement for her for the year ended 31 December 2021. Note: the 2021 data is in the left hand column. JB: Statement of Financial Position As At 31 December: Non-Current Assets Plant and Machinery Furniture and Fittings Current Assets Inventories Trade Receivables" Doubtful Debt Provision + Prepayment (Insurance) Bank Equity Proprietor's capital Retained Earnings Current Liabilities 2021- £* 450- 1,300 1,750- 500+ 400- 0+ 70+ 10,570 11,540 13,290- 2,000- 10,910- 12,910- 2020 500 1,500 2,000*** 400- 240- (30)*** 60 12,330 13,000 15,000- 2,000- 12,760 14,760- 698个字区 Equity Proprietor's capital Retained Earnings Current Liabilities Trade Payables Accruals (Delivery Cost) Cash Book for the Year to 31 December 2021- Balance at 1 January 2021 Cash received from credit sales" Cash paid for credit purchases Delivery cost paid Insurance cost paid Drawings" Other operating expenses Balance at 31 December 2021- # 2,000+ 10,910- 12,910 300- 80+ 380- 13,290 15,000 2,000*** 12,760*** 14,760-* 200 40 240- 15,000- 12,330* 19,820**** (1,000)* (240)**** (140) (20,000)**** (200)* 10.570 Additional Information from Jane: 1) All sales and purchases done in the year, were done on credit. 2) There were no purchases, disposals or revaluations of non-current assets in the year. 3) Jane only provides for doubtful debts provisions at the year-end if she is worried about specific customers not paying her. She is sure that all her customers included in the year- and finunn will now har hut ahe did boun to write all an amount of 600 on the 20. Dasambar 英语(英国) 698个字区 Equity Proprietor's capital Retained Earnings Current Liabilities Trade Payables Accruals (Delivery Cost) Cash Book for the Year to 31 December 2021- Balance at 1 January 2021 Cash received from credit sales" Cash paid for credit purchases Delivery cost paid Insurance cost paid Drawings" Other operating expenses Balance at 31 December 2021- # 2,000+ 10,910- 12,910 300- 80+ 380- 13,290 15,000 2,000*** 12,760*** 14,760-* 200 40 240- 15,000- 12,330* 19,820**** (1,000)* (240)**** (140) (20,000)**** (200)* 10.570 Additional Information from Jane: 1) All sales and purchases done in the year, were done on credit. 2) There were no purchases, disposals or revaluations of non-current assets in the year. 3) Jane only provides for doubtful debts provisions at the year-end if she is worried about specific customers not paying her. She is sure that all her customers included in the year- and finunn will now har hut ahe did boun to write all an amount of 600 on the 20. Dasambar 英语(英国) Other operating expenses" Balance at 31 December 2021- 4 (200)* 10,570 Additional Information from Jane:< 1) All sales and purchases done in the year, were done on credit.l 2) There were no purchases, disposals or revaluations of non-current assets in the year. 3) Jane only provides for doubtful debts provisions at the year-end if she is worried about specific customers not paying her. She is sure that all her customers included in the year- end figure will pay her, but she did have to write off an amount of £20 on the 30 December 2021. The gross trade receivables figure in the SOFP above, is after this bad debt write- off. 4) The prepayment relates to Insurance. She paid an annual amount of £120 on the 30 June 2020, to cover the period from 1 July 2020 to 30 June 2021. As the premiums went up, she had to pay £140 on the 30 June 2021 for the next annual payment. 5) The accruals related to her delivery costs. She receives the invoice for her delivery costs for the 3 months to December, in the January after every year end. She estimated the cost for the 3 months to December 2021 to be £80.< y Required: a) Prepare an Income Statement for Jane for the year ended 31 December 2021 and use it to reconcile the Retained Earnings figure for the year ended 2020, with the Retained Earnings figure for the year ended 2021, in the SOFP above. (20 marks) b) Jane would like to hire an assistant on a part-time basis to help sell more elastic bands, so that she (Jane), can just focus on the online sessions. She says she will include the assistant's wages of £12,000 per year in the 'Cost of Sales' figure. She expects the assistant to increase sales enough to maintain her current gross profit margin. 4 (1) Calculate Jane's gross profit margin based on your figures in part (a) before hiring the preletant. Other operating expenses" Balance at 31 December 2021- 4 (200)* 10,570 Additional Information from Jane:< 1) All sales and purchases done in the year, were done on credit.l 2) There were no purchases, disposals or revaluations of non-current assets in the year. 3) Jane only provides for doubtful debts provisions at the year-end if she is worried about specific customers not paying her. She is sure that all her customers included in the year- end figure will pay her, but she did have to write off an amount of £20 on the 30 December 2021. The gross trade receivables figure in the SOFP above, is after this bad debt write- off. 4) The prepayment relates to Insurance. She paid an annual amount of £120 on the 30 June 2020, to cover the period from 1 July 2020 to 30 June 2021. As the premiums went up, she had to pay £140 on the 30 June 2021 for the next annual payment. 5) The accruals related to her delivery costs. She receives the invoice for her delivery costs for the 3 months to December, in the January after every year end. She estimated the cost for the 3 months to December 2021 to be £80.< y Required: a) Prepare an Income Statement for Jane for the year ended 31 December 2021 and use it to reconcile the Retained Earnings figure for the year ended 2020, with the Retained Earnings figure for the year ended 2021, in the SOFP above. (20 marks) b) Jane would like to hire an assistant on a part-time basis to help sell more elastic bands, so that she (Jane), can just focus on the online sessions. She says she will include the assistant's wages of £12,000 per year in the 'Cost of Sales' figure. She expects the assistant to increase sales enough to maintain her current gross profit margin. 4 (1) Calculate Jane's gross profit margin based on your figures in part (a) before hiring the preletant. Required: a) Prepare an Income Statement for Jane for the year ended 31 December 2021 and use it to reconcile the Retained Earnings figure for the year ended 2020, with the Retained Earnings figure for the year ended 2021, in the SOFP above. e (20 marks) b) Jane would like to hire an assistant on a part-time basis to help sell more elastic bands, so that she (Jane), can just focus on the online sessions. She says she will include the assistant's wages of £12,000 per year in the 'Cost of Sales' figure. She expects the assistant to increase sales enough to maintain her current gross profit margin. N J (i) Calculate Jane's gross profit margin based on your figures in part (a) before hiring the assistant. (2 marks) (ii) How much would the assistant have to generate in sales (assuming the assistant was paid £12,000 per year), in order to achieve the same gross profit margin you calculated in part (i). (3 marks)+¹ (iii) Write an email to Jane explaining whether her expectations to generate the same gross profit margin, after hiring an assistant, is reasonable. Discuss any other financial issues that may arise from hiring an assistant. (5 marks)+¹ [Marks will only be awarded for answers that relate to the information and figures from this particular question. No marks will be awarded for general discussions.] Total 30 marks Required: a) Prepare an Income Statement for Jane for the year ended 31 December 2021 and use it to reconcile the Retained Earnings figure for the year ended 2020, with the Retained Earnings figure for the year ended 2021, in the SOFP above. e (20 marks) b) Jane would like to hire an assistant on a part-time basis to help sell more elastic bands, so that she (Jane), can just focus on the online sessions. She says she will include the assistant's wages of £12,000 per year in the 'Cost of Sales' figure. She expects the assistant to increase sales enough to maintain her current gross profit margin. N J (i) Calculate Jane's gross profit margin based on your figures in part (a) before hiring the assistant. (2 marks) (ii) How much would the assistant have to generate in sales (assuming the assistant was paid £12,000 per year), in order to achieve the same gross profit margin you calculated in part (i). (3 marks)+¹ (iii) Write an email to Jane explaining whether her expectations to generate the same gross profit margin, after hiring an assistant, is reasonable. Discuss any other financial issues that may arise from hiring an assistant. (5 marks)+¹ [Marks will only be awarded for answers that relate to the information and figures from this particular question. No marks will be awarded for general discussions.] Total 30 marks

• Expert Answer

a Income Statement for Jane for the year ended 31 December 2021 Par View the full answer