EcoPak Ltd is a small private company, specialising in themanufacture of takeaway packaging, which offers an environmentallyfriendly alternative to disposable food containers. The business’saccountant Kate has prepared a draft version of EcoPak’s BalanceSheet and Income Statement for the financial year ended 30 June2020. Kate knows she has made several mistakes in classifying theelements of the Balance Sheet and Income Statement because theincome statement shows EcoPak has made a loss and the Balance Sheetdoesn’t balance! Kate’s statements are shown below.
EcoPak Ltd - Draft Income Statement for the year ended30 June 2020 |
Cash at Bank | 255,000 |
Accrued Wages | 22,000 |
Gross profit | 277,000 |
Expenses | |
Bank Loan | 320,000 |
Interest expense | 27,000 |
Prepaid Rent | 3,600 |
Depreciation Expense | 43,000 |
Donations Expense | 12,000 |
Accounts Receivable | 14,000 |
Other expenses | 32,000 |
Earnings before interest and tax | -174,600 |
Accounts Payable | 22,000 |
Profit before tax | -196,600 |
Income tax expense | 125,000 |
Profit for the period from continuingoperations | -321,600 |
EcoPak Ltd – Draft Balance Sheet AS AT 30 June2020 |
Assets | Liabilities |
Current Assets | Current Liabilities |
Wages Expense | 78,000 | Drawings | -25,000 |
Cost of Sales | 376,000 | Inventory | 108,000 |
Rent Expense | 31,200 | Electricity expense | 18,000 |
Sales revenue | 1,244,000 | Non-current liabilities |
Prepaid Utilities | 2,100 | Trucks | 90,000 |
Property Plant and Equipment | 578,000 | Advertising Expense | 45,000 |
Non-current Assets | | Total Liabilities | 236,000 |
Retained Profits | 468,700 | Owner’s Equity | |
Mortgage | 63,000 | Insurance Expense | 72,000 |
| | Contributions | 198,000 |
| | Intangibles | 18,000 |
| | Total Owner’s Equity | 288,000 |
Total Assets | 2,841,000 | Total Liabilities and Owner’s Equity | 524,000 |
EcoPak Ltd – CORRECTED Draft Income Statement for theyear ended 30 June 2020 |
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Gross profit | |
Expenses |
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Earnings before interest and tax | |
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Profit before tax | |
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Profit for the period from continuingoperations | |
EcoPak Ltd – Draft Balance Sheet AS AT 30 June2020 |
Assets | Liabilities |
Current Assets | Current Liabilities |
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| | Non-current liabilities |
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Non-current Assets | | Total Liabilities | |
| | Owner’s Equity | |
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| | Total Owner’s Equity | |
Total Assets | | Total Liabilities and Owner’s Equity | |
