ACCOUNTING Compute the following transactions, for year XO. After computing them
ID: 2520853 • Letter: A
Question
ACCOUNTING
Compute the following transactions, for year XO. After computing them, present the Income
Statement, Balance Sheet and Cash Flow Statement as of December 31 st , X0, and answer to
the following questions:
a) Which is the shareholders’ equity value at the end of year X0?
b) What’s the financial position of the firm at the end of year X0? (Compare SHE and
Liabilities)
c) What’s the asset composition of the firm at the end of the year?
d) What’s the EBITDA, EBIT and Net income at the end of the year?
1. On January 1 st , X0, Company “X” is funded issuing 30.000 new shares with a nominal value
of 10 €, totaling 300.000 as Common Stock. The new shareholders pay 250.000 € and give
machinery & equipment to the firm valued at 50.000 €.
2. The operational startup expenses coming from legal fees and taxes are of 5.000 €.
3. a) “X” buys during the year automobile components on 1 st February X0. It buys 10.000 units
at 30 € per unit. Our supplier charges to “X” an output tax (sales tax) of 21%. The purchase
was paid 50% in cash, and the rest on credit.
b) During the year, it sells 8.000 units at 40 € per unit. 25% of such sales have not been
collected yet. The output tax (sales tax) is of 21%.
c) One month later, €75.000 of money owed to suppliers is paid.
4. “X” pays salary expenses of 30.000 €, rent for two full years, on 1 st February X0 (30.000 €)
(compute the full payment and then allocate the proper Rent expense for year X0). “X” has
also paid utility expenses of 6.000 €.
5. On March 31 st , X0, “X” issues a 200.000 € bond, at 6% annual interest rate payable
semiannually (i.e., on the 30 th September and 31 st March), with termination in X5, and no
repayment until such date. Market rate is 6%.
6.a) On 1 st April, X0, “X” buys 100 Telefonica shares at 15 € per share. These will be considered
as a Trading security asset.
b) On 30 th June, X0, Telefonica share price is 12.5€ per share. Adjust the investment
accordingly.
c) On 31 st July X0, “X” sells the shares at 12 € per share.
7. Compute as of 31 st December X0, the interest expenses accrued and paid referred to point 5.
8. Depreciation of the machinery is done in 5 years, using the straight line method.
9. “X” applies the allowance method to estimate potential bad debts. It has estimated that a 1%
of the sales on credit will be unpaid.
10. Corporate tax rate for the period: 30%
Explanation / Answer
a. Shareholder equity Value at the end of the year is 3,01,050
b. Liabilty is 3,14,150 (refer balance sheet below)
c. Asset composition is 6,15,200 (refer balance sheet below)
d. EBITDA 20,500 , EBIT is 10,500 , Net Income befor tax s 1500, Net Income after tax is 1050.
Refer Transactions, Income statement, Balance sheet and Cash flow below
Transactions in the books of XO for the year ended 31st December Journal Entries Amount in € Q. Ref Particulars Dr. Cr. 1 Cash and bank a/c Dr. 2,50,000 Machinery and AMP a/c Dr. 50,000 To Equity Share Capital Cr. 3,00,000 On January 1 st , X0, Company “X” is funded issuing 30.000 new shares with a nominal value of 10 €, totaling 300.000 as Common Stock. The new shareholders pay 250.000 € and give machinery & equipment to the firm valued at 50.000 € 2 Legal Fees a/c Dr. 5,000 Cash and bank a/c 5,000 The operational startup expenses coming from legal fees and taxes are of 5.000 € 3 Purchases a/c Dr. (10,000 * 30) 300000 Input Sales tax a/c Dr. (10,000*30*21%) 63000 To Supplier a/c 181500 Cash and bank a/c 181500 a “X” buys during the year automobile components on 1 st February X0. It buys 10.000 units at 30 € per unit. Our supplier charges to “X” an output tax (sales tax) of 21%. The purchase was paid 50% in cash, and the rest on credit. Cash and Bank a/c Dr. (75% of 40*8000*121%) 290400 Debtors a/c Dr. (25% of 40*8000*121%) 96800 To Sales a/c 320000 Output tax a/c 67200 b During the year, it sells 8.000 units at 40 € per unit. 25% of such sales have not been collected yet. The output tax (sales tax) is of 21%. Supplier a/c 75000 To Cash and bank a/c 75000 c One month later, €75.000 of money owed to suppliers is paid. 4 Salary A/c 30000 Rent a/c 15000 Prepaid rent a/c 15000 Utility a/c 6000 To Cash and bank a/c 66000 X” pays salary expenses of 30.000 €, rent for two full years, on 1 st February X0 (30.000 €) (compute the full payment and then allocate the proper Rent expense for year X0). “X” has also paid utility expenses of 6.000 €. 5 Cash and Bank A/c 200000 To Debenture a/c 200000 On March 31 st , X0, “X” issues a 200.000 € bond, at 6% annual interest rate payable semiannually (i.e., on the 30 th September and 31 st March), with termination in X5, and no repayment until such date. Market rate is 6%. 6 Investment (Held for Trading a/c) Dr. 1500 To Cash and Bank A/c 1500 a On 1 st April, X0, “X” buys 100 Telefonica shares at 15 € per share. These will be considered as a Trading security asset. Loss on Fair valuation of Assets a/c Dr. 250 TO Investment (Held for Trading a/c) 250 b On 30 th June, X0, Telefonica share price is 12.5€ per share. Adjust the investment accordingly. Cash and Bank a/c 1200 Loss on Sales of Investment a/c 300 To Investment ( Held for Trading a/c) 1250 Loss on Fair valuation of assets a/c 250 c On 31 st July X0, “X” sells the shares at 12 € per share. 7 Interest expenses a/c Dr. (200000*6%/2 + 200000*6%/2*3/6) 9000 To Cash and Bank A/c 6000 To Interest Payable a/c 3000 Compute as of 31 st December X0, the interest expenses accrued and paid referred to point 5. 8 Depreciation A/c (50,000/5) 10,000 To Accumulated Dep on Plant and Machinery 10,000 Depreciation of the machinery is done in 5 years, using the straight line method. 9 Expected Credit loss a/c 3200 To Allowance for Bad debts a/c 3200 “X” applies the allowance method to estimate potential bad debts. It has estimated that a 1% of the sales on credit will be unpaid. 10 Income Statement of XO for the year ended 31st December Particulars Amount Revenue from Operations 3,20,000 Purchases 3,00,000 (Increase)/ decrease in Inventories -60,000 Other expenses 56,300 Expected credit loss 3,200 -2,99,500 EBITDA 20,500 Depreciation 10,000 EBIT 10,500 Finance cost 9,000 Net Income before tax 1,500 Tax expenses @ 30% 450 Net Income 1,050 Balancesheet of X0 Limited Particulars Amount Shareholder fund Equity 3,00,000 Other Equity 1,050 Non Current Liabilities Debentures 6% 200000 Current Liabilities Interest payable 3000 Trade payables 106500 Sales tax payables 4200 Tax payable 450 Total Share holders fund and Liabilities 6,15,200 Assets Non Current Assets Plant and Machinery 40,000 Current Asstes Inventories 60,000 Trade receivables 93,600 Cash and Bank balances 4,06,600 Prepaid Rental 15000 6,15,200 -Related Questions
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