Question

YOJ is a sole importer of garden tractors, which are purchased from a foreign producer and resold to local gardeners and hobby markets. The opening balance sheet of YOJ as at 1 January 2X20 is as follows.

YOJ Balance sheet 01/01/2X20 in €
Inventory	470,000	Share capital	750,000
Receivables	225,000	Retained earnings	250,000
Cash	305,000
Total assets	1,000,000	Total equity & liabilities	1,000,000

Detail information concerning the opening Balance sheet 01/01/2X20:

• Inventory consists of 1,000 pieces of merchandise, purchased in 2X19 for price of €470/piece
• Receivables consists of gross amount €250,000 owed by customers, reduced by the estimated uncollectible amounts (10% of the outstanding receivables, i.e. €25,000)

Detail information about all transactions occurring during 2X20

1. Bank loan

On 2 January 2X20, a 5-year bank loan is originated at total amount of €50,000. At the end of each year (i.e. on 31 December 2X20, 2X21, 2X22, 2X23 and 2X24), the company must repay one fifth of the loan (i.e. €10,000) plus accrued interest on the loan, equivalent to 8% of the outstanding balance as at the beginning of the year.

2. Tangible assets

The loan is used to purchase two cars. The first car costs €35,000 and is to be used by the company’s chief operating manager. Its expected useful life is 3 years and then it will be sold on a secondhand market for an estimated price of €5,000. The second car, purchased for €15,000, is to be used by the sales manager. Expected useful life is 6 years and the secondhand market price at the time of disposal is estimated to be €3,000. Both cars are purchased on 5 January 2X20 and run since then.

3. Inventory and sales

Information on purchases¹ and sales of merchandise:

• January: purchase of 750 pieces for €400/piece
• February to September: sales of 1,200 piece for €840,000 in total
• October: purchase of 450 pieces for €460/piece
• November to December: sales of 500 pieces for €400,000 in total

Information on payments from customers:

• All customers with due payments at the beginning of the year have paid except for one, owing €30,000, who went bankrupt → YOJ received €220,000 and remaining €30,000 hadto be written-off.
• At the year-end, there are outstanding receivables of €300,000 related to sales in 2X20. Based on its past experience, YOJ estimates that 10% of the closing balance of trade receivables will never be collected.

Information on payments to suppliers:

1. • January purchase of inventory has been paid to the supplier; purchase made in October is due in February 2X21 and the payment has not been done yet.
2. Rental

In January 2X20, YOJ paid rental for the store and administrative offices. The contract is effective from January 2X20 to December 2X21 and the total amount paid for the store is €24,000 and for the offices €12,000.

2. Employees

The total salaries in 2X20 are €54,000 in the case of selling staff and €66,000 in the case of

management and other administrative staff. Unpaid balance as of 31 December 2X20 is €14,000 (to

be paid in January 2X21)

3. Income tax

Company’s tax advisor has prepared the tax‐filling (tax-return), according to which income tax expense for 2X20 is, after adjusting accounting profit for all non-deductible expenses and non- taxable income, €26,000. Liability is payable on 1 April 2X21; YOJ has made advance payments of

€15,000 during 2X20.

Tasks required

Financial statements

1. Prepare Balance sheet statement and Income statement of YOJ as of 31 December 2X20 following generally accepted accounting principles.

Please prepare it in an easy way to understand and detail the calculation. Thanks in advanced.

Answer 1

Answer :

According to given data ,lets Prepare Balance sheet statement and Income statement of YOJ as of 31 December 2X20 following generally accepted accounting principles.

2.

Income Statement For the year ended Dec 31, 2020
total Sales		1,240,000
Cost of Goods Sold		750,000
total Gross Profit		490,000
marketing and Administrative payments
Salaries payouts	120,000
Rent payments	36,000
Depreciation payout	12,000
Bad Debt payout	35,000	203,000
EBIT		287,000
Interest payment		4,000
EBT		283,000
Income Tax payouts		26,000
Net Income		257,000

Balance Sheet December 31, 2020
Assets		Liabilities and Equity
Cars, net of depreciation	38,000	Bank Loan	40,000
Inventory	227,000	Accounts Payable	207,000
Accounts Receivable, net	270,000	Income Taxes Payable	11,000
amount	994,000	Salaries Payable	14,000
		Share Capital	750,000
		Retained Earnings	507,000
Total Assets	15,290,000	Total Liabilities and Equity	15,290,000