Question

OKD Company is a trading company. The following financial data are derived from the accounting system in the beginning of April:

Accounts receivable23,000

Inventory24,200

Cash (Overdraft)(7,000)

Dividend payable1,000

Equipment at cost80,000

Accumulated depreciation19,200

Long-term note payable 14% 40,000

Share capital40,000

Retained earnings20,000

The company expects the following results during the second quarter of the year (next three months):      

	Sales	Purchases	Expenses including depreciation
	$	$	$
April	150,000	100,000	20,000
May	200,000	150,000	25,000
June	300,000	280,000	30,000

The company generates all revenues from sales on account and is able to collect all outstanding balances. Its collection pattern is as follows:        

        80% is collected during the month of sales (a 4% discount is given for payment in this period); and

        the remaining 20% is collected in the following month.

The company pays for its purchase made in the month of purchase in order to take advantage of a 10% settlement discount, calculated on the gross purchase amount presented above. Inventory levels are expected to remain constant throughout the quarter. There is no fluctuation in price when the company purchases its inventory. Depreciation rate of the equipment is 12% on cost per year. Expenses are recorded on a monthly basis. Expenses are paid for in the month in which they are incurred. The declared dividend will be paid in April. There is no repayment of the long-term note during the quarter. Interest on the note for the quarter will be paid in June.

What is the net profit for the quarter?

What is the total current assets at the end of the quarter?

What is the total non-current assets at the end of the quarter?

What is the total liabilities at the end of the quarter?

What is the total shareholders’ equity at the end of the quarter?

Answer 1

working			in $
	April	May	June	Total
Sales S	150000	200000	300000	650000
Sales discount of 4% of S*80%	4800	6400	9600
Net sales	145200	193600	290400	629200
Purchases P	100000	150000	280000
Less" Purchase discount 10%*P	10000	15000	28000
Cost of Good sold	90000	135000	252000	477000
(as inventory is same in all months hence purchases less discount is COGS)
Expenses including depreciation	20000	25000	30000	75000
Less: depreciation (80000*1%)	800	800	800
Cash expenses	19200	24200	29200	72600
ans 1
Income statement
Sales	629200
Less: COGS	477000
Less: Operating expenses	75000
Less: Interest expenses	1400
Net profit	75800
working
Collection from customers
	April	May	June	Total
Sales S	150000	200000	300000	650000
Collection from Accounts Receivables	23000			23000
From same month (S*80%*96%)	115200	153600	230400	499200
From previsous months (S*20%)		30000	40000	70000
Total cash collection	138200	183600	270400	592200
Less: Cash purchases	90000	135000	252000	477000
Cash expenses	19200	24200	29200	72600
Less: Dividend payable	1000			1000
Less: Interest payment (40000*14%*3/12)		1400	1400
Net cash increase	28000	24400	-12200	40200
Ans 2 Current Assets at end of quarter
Cash -7000+40200	33200
Accounts Receivable (300000*20%)	60000
Inventory	24200
Total current assets	117400
ans 3
Non current assets
Equipment at cost	80000
Accumulated depreciation (19200+2400)	21600
Total Non current assets	58400
ans 4
Total liabilities
Long term Note payable	40000
ans 5
Total shareholder Equityu
Share capital	40000
Reatined Earnings (20000+75800)	95800
Total shareholder Equity	135800

If any doubt please comment