Derivation of revenues and expenses I
Alain ('Al') Addin runs a shop in Brussels, specialising in the sale of handmade lamps from the Orient. He comes to you early in year 6 with the following balance sheets and extracts from his cash book. Addin wants to find out the annual income for year 5 from the shop's activities and to determine the income tax which will have to be paid (at the rate of 40%) on year 5 profits.
Balance sheets at start and end of year 5 (amounts in 000)
|
Assets
|
1/1
|
31/12
( provisional)
|
|
Cash
|
15
|
26
|
|
Accounts receivable
|
10
|
15
|
|
Merchandise inventory
|
55
|
57
|
|
Equipment, net of depreciation
|
25
|
27
|
|
Total assets
|
105
|
125
|
|
Equities
Accounts payable for merchandise
|
14
|
19
|
|
Share capital
|
60
|
60
|
|
Retained profit
|
31
|
46
|
|
Total equities
|
105
|
125
|
(The 31 December balance sheet is provisional because the income tax liability for the year has not been established.)
Extracts from year 5 cash book (amounts in 000)
Cash sales +81
Collections from credit customers +65
Payments to suppliers of lamps -70
Cash purchases of equipment -7
Salaries and other operating outlays -58
There were no disposals of equipment in year 5. No taxes have yet been paid.
Required
Compute each of the following for year 5:
(a) revenue from credit sales;
(b) cost of lamps purchased (all purchased on account);
(c) cost of lamps sold;
(d) depreciation expense;
(e) before-tax profit;
(f) tax expense and liability for the year.