Jennifer decides that she will go into the tourist industry on Lake Geneva, and
ID: 2339894 • Letter: J
Question
Jennifer decides that she will go into the tourist industry on Lake Geneva, and buy a concession to hire out canoes on the lake. She borrows CHF40,000 (CHF is swiss currency) from her parents and puts CHF20,000 in herself. The arrangment with the Canton is that she pays CHF50,000 at the start for the concession, which runs five years, but must also pay an annual rental of CHF10,000 at the end of the season in october. She negotiates a deal with a canoe supplier who sells her 20 canoes for CHF 30,000 but agrees that she should pay CHF10,000 on delivery and the rest a year later. During the season she receives CHF 90,000 (cash) in canoe rentals.
Task: Making and specifying whatever assumptions you wish, you are asked to draw up a simple statement of profit or loss for the first year and statement of finacial postiton at the end of the year.
Explanation / Answer
Statement of profit and loss
Particulars
Amount (in CHF)
Amount received by way of Canoe rentals
90000
Less:
Purchase of Canoes
(30000)
Amortization of the start up cost of arrangement
(10000)
Annual rent
(10000)
Net profit for the year
40000
Statement of financial position
Particulars
Amount (in CHF)
Assets
Cash in hand
80000
Deposit with Canton
40000
Total assets
120000
Liabilities
Amount
Amount due to supplier
20000
Loan
40000
Capital
20000
Net profit for the year
40000
Total
1200000
Assumptions
Particulars
Amount
Amount received from parents
40000
Amount invested himself
20000
Rental receipts
90000
Less:
Annual rental
10000
Start up payment
50000
Payment to supplier
10000
Net cash balance
80000
Particulars
Amount (in CHF)
Amount received by way of Canoe rentals
90000
Less:
Purchase of Canoes
(30000)
Amortization of the start up cost of arrangement
(10000)
Annual rent
(10000)
Net profit for the year
40000
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