Accounting Business Reporting for Decision Making

256 Accounting: Business Reporting for Decision Making

$’000

Rent received in advance

Share capital

Retained earnings

Service revenue

Rent revenue

Supplies expense

Rent expense

Insurance expense

Depreciation expense

Salaries expense

12 000

75 000

16 000

178 000

14 000

17 500

29 500

2 100

20 650

114 300

6.30   LO4, 11

‘The profit represents the increase in the value of the entity during the reporting period.’ Critically

evaluate this statement.

6.31   LO9

You are the assistant accountant at Coconut Plantations Pty Ltd, and you have prepared the

following statement of profit or loss for the year ended 31 December 2018.

Coconut Plantations Pty Ltd

Statement of profit or loss for the year ended 31 December 2018

Sales

Cost of sales

Other income

Warehousing expenses

Distribution expenses

Sales and marketing

Administration expenses

Finance expenses

$1 675 000

1 025 000

1 500

57 000

20 000

105 000

115 000

18 000

Profit before income tax $ 336 500

Additional information

• The other income comprises $1200 of interest income.


• Administrative expenses include $30 000 for the depreciation of office equipment.


• Finance expenses of $18 000 represent interest expense on a bank loan.


• Administration expenses include the write-off of the amount owed by a major customer
  ($38 000 ) who has gone bankrupt.
  Required
  The accountant has asked you to produce the following financial information:
  a. gross profit
  b. profit before interest
  c. profit before material items
  d. earnings before interest, tax and depreciation.

Problems

 BASIC |   MODERATE |    CHALLENGING

6.32 Assessing comparative statement of profit or losss  LO4, 9

The statement of profit or loss for JB Hi-Fi Ltd for the financial year ended 30 June 2015 was pro-

vided in figure 6.2. It reports that JB Hi-Fi Ltd has increased its gross profit from $756.0 million in

2014 to $798.3 million in 2015. Its profit for 2015 is $136.5 million compared to $128.4 million in

2014. The financial performance allows a manager to assess previous decisions and inform future
      decisions. Hypothesise as to the reasons or business decisions contributing to the increase in the
      gross profit in 2015. Assess why the profit in 2015 is higher than in 2014.