Reference no: EM13904629

Derivation of revenues and expenses I

Alain ('Al') Addin runs a shop in Brussels, specialising in the sale of handmade lamps from the Orient. He comes to you early in year 6 with the following balance sheets and extracts from his cash book. Addin wants to find out the annual income for year 5 from the shop's activities and to determine the income tax which will have to be paid (at the rate of 40%) on year 5   profits.

Balance sheets at start and end of year 5 (amounts in 000)

Assets	1/1	31/12 ( provisional)
Cash	15	26
Accounts receivable	10	15
Merchandise inventory	55	57
Equipment, net of  depreciation	25	27
Total assets	105	125
Equities Accounts payable for merchandise	14	19
Share capital	60	60
Retained profit	31	46
Total equities	105	125

(The 31 December balance sheet is provisional because the income tax liability for the year has not been established.)

Extracts from year 5 cash book (amounts in 000)

Cash sales                                                           +81

Collections from credit customers                           +65

Payments to suppliers of lamps                              -70

Cash purchases of equipment                                -7

Salaries and other operating outlays                       -58

There were no disposals of equipment in year 5. No taxes have yet been  paid.

Required

Compute each of the following for year  5:

(a) revenue from credit sales;

(b) cost of lamps purchased (all purchased on  account);

(c) cost of lamps sold;

(d) depreciation expense;

(e) before-tax profit;

(f)  tax expense and liability for the year.