Golden cup case study You were provided with the following balance sheet for Golden Cup firm for the year Dec 31st, 2018 Golden Balance sheet- Golden Cup As of Dec 31st, 2018 ASSETS Current Assets Cash 40,000 Accounts Receivables 4,000 Inventory 14,000 Total Current Assets 58,000 Fixed Assets Property, Plant, and Equipment 56,000 Goodwill 24,000 Total Fixed Assets 80,000 Total Assets 138,000   Liabilities + Owners Equity Current Liabilities Accounts Payable 12,000 Notes Payable 6,000 Accrue Wages 1,000 Total Currents Liabilities 19,000   Long Term Debt 40,000   Owners' Equity Common Shares 40,000 Retained Earnings 39,000 Total Owners Equity 79,000 Liabilities + Owners Equity 138,000   In addition to that, you know the following facts about firm's operations throughout the year: § Golden Cup revenues for the year includes the following: Domestic revenues $160,000

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Golden cup case study

You were provided with the following balance sheet for Golden Cup firm for the year Dec 31st, 2018

Golden Balance sheet- Golden Cup As of Dec 31st, 2018

ASSETS

Current Assets

Cash 40,000

Accounts Receivables 4,000

Inventory 14,000

Total Current Assets 58,000

Fixed Assets

Property, Plant, and Equipment 56,000

Goodwill 24,000

Total Fixed Assets 80,000

Total Assets 138,000

 

Liabilities + Owners Equity

Current Liabilities

Accounts Payable 12,000

Notes Payable 6,000

Accrue Wages 1,000

Total Currents Liabilities 19,000

 

Long Term Debt 40,000

 

Owners' Equity

Common Shares 40,000

Retained Earnings 39,000

Total Owners Equity 79,000

Liabilities + Owners Equity 138,000

 

In addition to that, you know the following facts about firm's operations throughout the year:

§ Golden Cup revenues for the year includes the following: Domestic revenues $160,000. International revenues $80,000. Out of Golden Cup's sales, cost of sales and direct labor is 50% of annual revenues.

 

§ Because of the strong competition that it faces, Golden Cup has a generous marketing plan. Golden Cup signed a contract with the marketing planet Inc. by which the marketing agency will be responsible for Golden Cup marketing for five years period started this year. The contract costs Golden Cup $100,000 that were paid up front, however the company thinks this plan will affect its sales evenly over the five years period. Golden Cup also spends $30,000 in the form of general and administrative expenses per year. Golden Cup depreciable assets historical value is $40,000 and is depreciated on a straight line basis over 10 years.

 

§ Golden Cup pays interest rate of 10% on its Long-term debt outstanding.

 

§ Out of the year's net income, Golden Cup is planning to repay $30,000 to its shareholders in the form of cash dividends. The company currently has 60,000 shares outstanding

Question 1

a- Please set up income statement for Golden Cup:

Consolidation Income Statement- Golden Cup, As of Dec 31st, 2018

Show your workings here Final Answer Here

Revenues:

(-) Cost of goods sold:

Gross Margin:

(-) Marketing expenses:

(-) General and administrative expenses:

(-) Depreciation:

EBIT

(-) Tax Expenses

Net Income

Dividends

Additions to Retained Earnings

b- Please use the U.S corporate tax rates to calculate Golden Cup tax liability.

c- What is the marginal tax rate of Golden Cup?

d- What is the average tax rate of Golden Cup?