Question 2 Lodh Ltd. commenced business operations on 1 January 2015. The cash r

Question

Question 2 Lodh Ltd. commenced business operations on 1 January 2015. The cash receipts and cash payments of the business for the first year of operations were as follows: Cash receipt Cash ents: Collections from customers $46,000 Wages cash revenue $16,000 Office supplies Rent Drawings by owner Advertisin Insurance 7,000 12,400 10,000 2,600 400 Additional information: At 31 December 2015, customers are owing $4,000 to the business for services that were provided by Lodh Ltd during 2015 At 31 December 2015, $1,000 of wages are owing to an employee for work done during 2015 At 31 December 2015, it was identified that $1,600 of supplies are on hand. At 31 December 2015, S800 of rent has been paid in advance for January 2016. Required Prepare a statement of financial performance (profit and loss statement) on an accrual basis for Lodh Ltd for the year ending 2015. Answer Question 2 below: Lodh Ltd Statement of profit or Loss For the year ending 31t Dec 2015 Cash transactions AccrualAccrual Basis Total ad nts Revenue/Ex Revenue Less Expenses Net Profit

Explanation / Answer

Solution of Question 2 Lodh Ltd Statement of Profit or Loss For the year ending 31st December 2015 Particulars Cash Transactions Accrual Adjustments Accrual Basis Total Revenue/Expenses($) Revenue from Operations.(A) $42000(i.e. 46000-4000)                                                              46,000.00 Less: Expenses            Wages $15000(i.e16000-10000 No Accrual Adjustments                                                              16,000.00             Office Expenses $7000 $7000-$1600                                                                5,400.00             Rent $12400 $12400-$800                                                              11,600.00             Advertising Costs $2600                                                                2,600.00             Insurance Costs $2400                                                                2,400.00           Total Expenses(B)                                                              38,000.00 Profit Before Tax(A-B)                                                                8,000.00 Less: Tax Expenses            Current Tax                                                                             -              Deferred Tax                                                                             -   Net Profit                                                                8,000.00 Solution of Question 7 Let the no of units sold be x. a) The before tax profit is as follows = ((Sales - cost of goods sold)-Direct Expenses)-Indirect expenses)                                                                           = (10x-5x)-1.4x-380000-240000 (Ans.) b) As per question, we get ((10x-5x)-1.4x-380000-240000)*0.70 = 126000 By solving the above equation, we get x= 2,22,222.22 units Therefore, the total no of units to be sold to reach the target of after tax profit is 2,22,222.22 units c) Sales Units in 2017 = 2,22,222.22 units New Sales = 2,22,222.22 -(25% of 2,22,222.22) =1,66,666.67 units (approx.) New after Tax profit = {(10-5)*1,66,666.67-(1.4*1,66,666.67)-380000-240000}*0.70 = $14,000 (Ans.)

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.