In: Finance
Rafael Ron trades as Goal Company. He buys and sells professional soccer balls. For the April of 2017, the following details of his business are available:
Opening inventory of balls (on 1st April 2017): 150 pieces at total cost of £1,200
Purchased in April: 180 pieces of balls at £7.5 each
During April he sold 190 pieces for £17 each (£3,230 in total)
Closing stock is valued at £7.5 per piece
Rent for the storehouse is paid in advance: the fee is £420 for a quarter year.
His assistant, Amy, receives £200 a month; it is always paid on the second workday of
the following month.
Postage costs were £1500 in total for the whole year.
On 10th of May the Goal Company received the £800 invoice of the firm’s marketing
advisor in connection with services provided in April.
Show your calculations and answer the following questions
Prepare an Income Statement for Rafael Ron’s business for the month of April 2017.
Please create/give two hypothetical business transaction that can have effect on the profit of the company (try to match them to the profile of the company). Explain how the transactions will affect the revenues and expenses
Goal Company | ||
Income statement for the month ended April ,2017 | ||
Sales revenue | 3230 | |
Less: Cost of goods sold | 1500 | |
Gross Profit | 1730 | |
Expenses: | ||
Rent [420/3] | 140 | |
Salary | 200 | |
Postage [1500/12] | 125 | |
Marketing | 800 | |
Total expenses | 1265 | |
Net Income | 465 |
Workings:
Opening inventory of balls | 150 | 1200 |
Purchased [ 180*7.5] | 180 | 1350 |
Total units available for sale | 330 | 2550 |
Less: Units sold [ 2550-1050] | 190 | 1500 |
Closing stock [140*7.5] | 140 | 1050 |
(ii)
The following can have effect of the profit of the company:
(i) Packing charges of the soccer balls in custom made bags can increase the profit when the company charges additional money per unit for the packing. This can increase the revenues as well as profits if the firm is able to negotiate costs as well.
(ii) Maintenance of closing stock i.e. storage, insurance and labor costs can increase the expenses and reduce the profits.