Question

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

  1. Prepare an Income Statement for Rafael Ron’s business for the month of April 2017.

  2. 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

Answer 1

Following are the two business transactions that can have effect on profit of the company:

1) Packing Charges

Company can charge from customers some extra amount for packing of soccer balls which inturn increases the revenue of the company and thereby increases the profits if it is able to manage the costs of packing.

2) Discount

Company can asked for discount from the supplier of the soccer balls on its bulk purchasing which inturn reduces the purchases cost and increasing the profit of the company.