Scenario: Jim played football for a famous club but, due to a long term injury and on medical advice, he retired from the game in January 2007. The club, grateful for Jim’s contribution to their success over the years, held a testimonial match in Jim’s honour. Jim received €150,000 from this testimonial match and he decided to open a shop selling sporting goods with the proceeds. On 1 May 2007, Jim opened a business bank account into which he paid the €150,000. In the first year of trading, he undertook the following transactions: 2 May 2007: Jim signed a five year lease on a shop in the town centre and paid €50,000 to cover the lease for the whole five years 3 May 2007: Jim paid shop fitters €10,000 for shelves and racking and for the electronic till in which to record sales. Jim expects these assets will also have a useful life of 5 years. He hired a part time assistant at a cost of €250 per month paid monthly by cheque from the business bank account. While his main business is to sell sporting goods to cash customers who come into the shop, he also supplied business customers who pay on account each month. During the first year of trading, Jim made cash sales of €96,000 and credit sales to his business customers of €19,600. At the end of April 2008, the amount owing from credit customers for sporting goods supplied was €6,800. However, Jim does not think that one local business which went into liquidation on the last day of April 2008 will pay their debt :they currently owe €1,200 for sporting goods purchased. All takings were paid into the business bank account. Jim purchased his sporting goods from various manufacturers on credit terms of 30 days. The cost of purchases for the year to 30 April 2008 was €60,000. At the end of April 2008, Jim still owed €12,000 to various sporting goods manufacturers Telephone expenses for the year amounted to €800 which Jim paid out of the business bank account. Jim withdrew €1,000 a month from the business for his own personal expenditure. At 30 April 2008, Jim counted and valued the stock on hand and his valuation of the stock at the year end was €5,600 After the end of April 2008 Jim has agreed to pay you €200 for your accounting expertise and for drawing up the accounts for him. Jim paid out €1,000 for heat and light during the year to 30 April 2008 but reckons that he owes a further €150 for the month of April which the electricity company has not billed him for yet. Question: From the above information: Prepare Jim’s bank account and determine the balance in the bank at the end of the year Draw up Jim’s Income Statement for the year to 30 April 2008 Draw up Jim’s Balance Sheet at 30 April 2008

Scenario: Jim played football for a famous club but, due to a long term injury and on medical advice, he retired from the game in January 2007. The club, grateful for Jim’s contribution to their success over the years, held a testimonial match in Jim’s honour. Jim received €150,000 from this testimonial match and he decided to open a shop selling sporting goods with the proceeds. On 1 May 2007, Jim opened a business bank account into which he paid the €150,000. In the first year of trading, he undertook the following transactions: 2 May 2007: Jim signed a five year lease on a shop in the town centre and paid €50,000 to cover the lease for the whole five years 3 May 2007: Jim paid shop fitters €10,000 for shelves and racking and for the electronic till in which to record sales. Jim expects these assets will also have a useful life of 5 years. He hired a part time assistant at a cost of €250 per month paid monthly by cheque from the business bank account. While his main business is to sell sporting goods to cash customers who come into the shop, he also supplied business customers who pay on account each month. During the first year of trading, Jim made cash sales of €96,000 and credit sales to his business customers of €19,600. At the end of April 2008, the amount owing from credit customers for sporting goods supplied was €6,800. However, Jim does not think that one local business which went into liquidation on the last day of April 2008 will pay their debt :they currently owe €1,200 for sporting goods purchased. All takings were paid into the business bank account. Jim purchased his sporting goods from various manufacturers on credit terms of 30 days. The cost of purchases for the year to 30 April 2008 was €60,000. At the end of April 2008, Jim still owed €12,000 to various sporting goods manufacturers Telephone expenses for the year amounted to €800 which Jim paid out of the business bank account. Jim withdrew €1,000 a month from the business for his own personal expenditure. At 30 April 2008, Jim counted and valued the stock on hand and his valuation of the stock at the year end was €5,600 After the end of April 2008 Jim has agreed to pay you €200 for your accounting expertise and for drawing up the accounts for him. Jim paid out €1,000 for heat and light during the year to 30 April 2008 but reckons that he owes a further €150 for the month of April which the electricity company has not billed him for yet. Question: From the above information: Prepare Jim’s bank account and determine the balance in the bank at the end of the year Draw up Jim’s Income Statement for the year to 30 April 2008 Draw up Jim’s Balance Sheet at 30 April 2008

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter4: Gross Income: Concepts And Inclusions

Section: Chapter Questions

Problem 41P

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Question

Scenario:

Jim played football for a famous club but, due to a long term injury and on medical advice, he retired from the game in January 2007. The club, grateful for Jim’s contribution to their success over the years, held a testimonial match in Jim’s honour. Jim received €150,000 from this testimonial match and he decided to open a shop selling sporting goods with the proceeds. On 1 May 2007, Jim opened a business bank account into which he paid the €150,000. In the first year of trading, he undertook the following transactions:

2 May 2007: Jim signed a five year lease on a shop in the town centre and paid €50,000 to cover the lease for the whole five years
3 May 2007: Jim paid shop fitters €10,000 for shelves and racking and for the electronic till in which to record sales. Jim expects these assets will also have a useful life of 5 years.
He hired a part time assistant at a cost of €250 per month paid monthly by cheque from the business bank account.
While his main business is to sell sporting goods to cash customers who come into the shop, he also supplied business customers who pay on account each month. During the first year of trading, Jim made cash sales of €96,000 and credit sales to his business customers of €19,600. At the end of April 2008, the amount owing from credit customers for sporting goods supplied was €6,800. However, Jim does not think that one local business which went into liquidation on the last day of April 2008 will pay their debt :they currently owe €1,200 for sporting goods purchased. All takings were paid into the business bank account.
Jim purchased his sporting goods from various manufacturers on credit terms of 30 days. The cost of purchases for the year to 30 April 2008 was €60,000. At the end of April 2008, Jim still owed €12,000 to various sporting goods manufacturers
Telephone expenses for the year amounted to €800 which Jim paid out of the business bank account.
Jim withdrew €1,000 a month from the business for his own personal expenditure.
At 30 April 2008, Jim counted and valued the stock on hand and his valuation of the stock at the year end was €5,600
After the end of April 2008 Jim has agreed to pay you €200 for your accounting expertise and for drawing up the accounts for him.
Jim paid out €1,000 for heat and light during the year to 30 April 2008 but reckons that he owes a further €150 for the month of April which the electricity company has not billed him for yet.

Question:

From the above information:

Prepare Jim’s bank account and determine the balance in the bank at the end of the year
Draw up Jim’s Income Statement for the year to 30 April 2008
Draw up Jim’s Balance Sheet at 30 April 2008

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