a) Prepare Statement of Income for period ending 30.09.2019 and the proposed dividend.
b)Prepare a Statement of Financial Position at 30.09.2019
Background to the Company The Company was launched with an issue of 3 shares of nominal value of 1 each. One share was purchased by each of Mr Greasy, Mrs Greasy and Mr Quiet. Each paid 10,000 for their share. The business initially operated as eat-in and take-away. However, soon after the launch of the business, it introduced a Delivery service within an 8 mile radius of the centre of Canterbury. McDoner's operates from a rented property in the centre of Canterbury. The current rent is 892.50 per month. The business owned the following equipment at 30 September 2018: Item Purchase Purchase Expected Estimated Depreciated Date Cost useful life scrap value value at 30 at end of life September 2018 Moped for 1/7/2018 E810 3 years 162 709 deliveries Cooking 1/1/2015 10,000 15 years 1,000 7.751 Equipment Refrigeration 1/1/2016 2.000 7 years N 1.214 equipment Furniture 1/1/2018 1,620 3 years 1.218 Cash register, 1/1/2018 23.456 3 years 54 1.230 computer, printer The business so far After a slow start in early January 2015, the business started to build up a loyal customer base. However, in the first year of business, McDoner's made a loss. In October 2015 several customers became ill. Mr Greasy claimed this is due to "freshers' flu", but the cause was later identified as food poisoning. McDoner's was fined 5,000 by Canterbury City Council The business continued to grow in 2016. During 2016, McDoner's considered buying competitor business New Cod on the Block' but decided not to proceed with the purchase. During 2017, Mrs Greasy became very interested in entomophagy-the eating of insects as food. She decided that McDoner's should also sell a new range of fusion food that she called Tex Tok Ticks - insects fried in a Japanese tempura batter and served with Texas barbeque sauce. However, she later discovered there was little demand from her student customers to eat insects, and this business line was quickly abandoned. In 2018, much of McDoner's original equipment reached the end of its useful life, and replacement assets were purchased. Key accounting information for the periods to 30 September 2018 is shown on Moodle. Information about depreciation McDoner's recognises depreciation using the reducing balance method for the Moped and the cash register, computer and printer equipment. It recognises depreciation for the cooking, refrigeration equipment and furniture using the straight line method. Information about tax The business will pay tax at a rate of 19% on taxable profits. If the business makes a taxable loss in one financial period, it will not pay tax in that period, and will be able to carry forward that loss to offset against taxable profits in future periods. Information about business funding The business has an outstanding loan of 1,000, with an interest rate of 6.5% pa. The loan is repayable on an interest-only basis, with the capital repayment falling due on 31 January 2019. McDoner's would like to pay dividends each year equivalent to 40% of the Net Profit after Tax achieved in that year, provided that the cumulative Retained Profit does not become negative. Any such dividend would be paid in February of the following year. Information for Year Ending 30 September 2019 In February 2019, McDoner's paid 5,346 tax due in respect of the period to 30 September 2018. In the same month, it paid a total of 8,554 dividends to the shareholders, based on the 2018 results. From October 2018, New Cod on the Block introduced large discounts to the prices for its regular customers. As a result, McDoner's lost customers, and its average monthly Revenue for the year to 30 September 2019 was 20% lower than its average monthly revenue in the year to 30 September 2018. To counter this challenge, McDoner's is considering entering the corporate offsite catering industry. It spent 8,000 over the year on advice from SL Business Services Ltd about this possibility Average monthly Purchases of stock for the year to 30 September 2019 were 4,900. Trade payables at 30 September 2019 were 6% higher than at 30 September 2018. The business spent 4,000 on advertising during the year. . During the year, the shop staff undertook periods of Strike Action, demanding cleaner uniforms and nicer frilly hats. This left the shop without staff for several weeks, so Mr and Mrs Greasy, and Mr Quiet all had to spend additional time working in Quiet all had to spend additional time working in the shop. Wages for the shop staff (paid when they were not on strike) were 15,000 over the year. Wages for delivery staff were 11,400 over the year Salaries for Mr Greasy and Mrs Greasy were 45,000 in total over the year. Mr Quiet received no salary for his work, but has insisted that the Dividend from this year's business must be at least 3% higher than that paid for last year, provided this would maintain a positive aggregate Retained Earnings figure after such a payment. Other expenses (fuel, insurance, energy) were 4,200. Inventory at the end of the period was 900. Historic Accounts for McDoner's Ltd Business commenced 1 January 2015 Statement of Income, McDoner's Ltd Year Ended Revenue Cost of Sales Gross Profit 31/12/15 94,000 67,570 26,430 31/12/16 157,300 73,066 84,234 9 months ended 30/9/17 125,054 62,198 62,855 12 months ended 30/9/18 183.412 96,263 87,149 Administration Costs Distribution Costs Operating Profit 40,000 10.826 -24,396 40,200 11,338 32,696 30,200 9.186 23.470 44.828 15,526 26,795 700 Finance Costs Net Profit before Tax 376 32,320 481 23,421 -25,096 26,730 2,445 29.875 4,684 18,737 5,346 21,384 Net Profit after Tax -25,096 Notes Loss made (even without the Fine), no tax payable, and no dividend could be declared. Dividend Payable recommended at the year end 4,779 Dividend Payable Dividend Payable recommended at the year recommended at the year end 7,495 end 8,554 Historic Accounts for McDoner's Ltd Business commenced 1 January 2015 Statement of Financial Position, McDoner's Ltd Year Ending 31/12/15 31/12/16 30/9/17 30/9/18 Assets Non Current Assets Equipment 12,174 11,549 11,773 12.122 5 Current assets Cash Inventories Total Assets 4,000 570 16.744 28.083 450 40,082 43.855 670 56,298 7,926 820 0.868 7 Equity Share Capital Share Premium Account Retained Earnings Total Equity 29.997 -25,096 4.904 29.997 4.779 34.779 29.997 18.737 48.737 29.997 32.626 62.626 Long term Liabilities Loan due in 2019 1.000 1.000 10,000 Current Liabilities Loan due in 2016 Loan due in 2019 Trade Payables Tax due 1,840 1,858 2,445 1,877 4,684 1.000 1.896 5.346 Total Liabilities 5,303 7.561 8.242 Total Equity and Liabilities 16,744 40,082 56,298 70.868 Background to the Company The Company was launched with an issue of 3 shares of nominal value of 1 each. One share was purchased by each of Mr Greasy, Mrs Greasy and Mr Quiet. Each paid 10,000 for their share. The business initially operated as eat-in and take-away. However, soon after the launch of the business, it introduced a Delivery service within an 8 mile radius of the centre of Canterbury. McDoner's operates from a rented property in the centre of Canterbury. The current rent is 892.50 per month. The business owned the following equipment at 30 September 2018: Item Purchase Purchase Expected Estimated Depreciated Date Cost useful life scrap value value at 30 at end of life September 2018 Moped for 1/7/2018 E810 3 years 162 709 deliveries Cooking 1/1/2015 10,000 15 years 1,000 7.751 Equipment Refrigeration 1/1/2016 2.000 7 years N 1.214 equipment Furniture 1/1/2018 1,620 3 years 1.218 Cash register, 1/1/2018 23.456 3 years 54 1.230 computer, printer The business so far After a slow start in early January 2015, the business started to build up a loyal customer base. However, in the first year of business, McDoner's made a loss. In October 2015 several customers became ill. Mr Greasy claimed this is due to "freshers' flu", but the cause was later identified as food poisoning. McDoner's was fined 5,000 by Canterbury City Council The business continued to grow in 2016. During 2016, McDoner's considered buying competitor business New Cod on the Block' but decided not to proceed with the purchase. During 2017, Mrs Greasy became very interested in entomophagy-the eating of insects as food. She decided that McDoner's should also sell a new range of fusion food that she called Tex Tok Ticks - insects fried in a Japanese tempura batter and served with Texas barbeque sauce. However, she later discovered there was little demand from her student customers to eat insects, and this business line was quickly abandoned. In 2018, much of McDoner's original equipment reached the end of its useful life, and replacement assets were purchased. Key accounting information for the periods to 30 September 2018 is shown on Moodle. Information about depreciation McDoner's recognises depreciation using the reducing balance method for the Moped and the cash register, computer and printer equipment. It recognises depreciation for the cooking, refrigeration equipment and furniture using the straight line method. Information about tax The business will pay tax at a rate of 19% on taxable profits. If the business makes a taxable loss in one financial period, it will not pay tax in that period, and will be able to carry forward that loss to offset against taxable profits in future periods. Information about business funding The business has an outstanding loan of 1,000, with an interest rate of 6.5% pa. The loan is repayable on an interest-only basis, with the capital repayment falling due on 31 January 2019. McDoner's would like to pay dividends each year equivalent to 40% of the Net Profit after Tax achieved in that year, provided that the cumulative Retained Profit does not become negative. Any such dividend would be paid in February of the following year. Information for Year Ending 30 September 2019 In February 2019, McDoner's paid 5,346 tax due in respect of the period to 30 September 2018. In the same month, it paid a total of 8,554 dividends to the shareholders, based on the 2018 results. From October 2018, New Cod on the Block introduced large discounts to the prices for its regular customers. As a result, McDoner's lost customers, and its average monthly Revenue for the year to 30 September 2019 was 20% lower than its average monthly revenue in the year to 30 September 2018. To counter this challenge, McDoner's is considering entering the corporate offsite catering industry. It spent 8,000 over the year on advice from SL Business Services Ltd about this possibility Average monthly Purchases of stock for the year to 30 September 2019 were 4,900. Trade payables at 30 September 2019 were 6% higher than at 30 September 2018. The business spent 4,000 on advertising during the year. . During the year, the shop staff undertook periods of Strike Action, demanding cleaner uniforms and nicer frilly hats. This left the shop without staff for several weeks, so Mr and Mrs Greasy, and Mr Quiet all had to spend additional time working in Quiet all had to spend additional time working in the shop. Wages for the shop staff (paid when they were not on strike) were 15,000 over the year. Wages for delivery staff were 11,400 over the year Salaries for Mr Greasy and Mrs Greasy were 45,000 in total over the year. Mr Quiet received no salary for his work, but has insisted that the Dividend from this year's business must be at least 3% higher than that paid for last year, provided this would maintain a positive aggregate Retained Earnings figure after such a payment. Other expenses (fuel, insurance, energy) were 4,200. Inventory at the end of the period was 900. Historic Accounts for McDoner's Ltd Business commenced 1 January 2015 Statement of Income, McDoner's Ltd Year Ended Revenue Cost of Sales Gross Profit 31/12/15 94,000 67,570 26,430 31/12/16 157,300 73,066 84,234 9 months ended 30/9/17 125,054 62,198 62,855 12 months ended 30/9/18 183.412 96,263 87,149 Administration Costs Distribution Costs Operating Profit 40,000 10.826 -24,396 40,200 11,338 32,696 30,200 9.186 23.470 44.828 15,526 26,795 700 Finance Costs Net Profit before Tax 376 32,320 481 23,421 -25,096 26,730 2,445 29.875 4,684 18,737 5,346 21,384 Net Profit after Tax -25,096 Notes Loss made (even without the Fine), no tax payable, and no dividend could be declared. Dividend Payable recommended at the year end 4,779 Dividend Payable Dividend Payable recommended at the year recommended at the year end 7,495 end 8,554 Historic Accounts for McDoner's Ltd Business commenced 1 January 2015 Statement of Financial Position, McDoner's Ltd Year Ending 31/12/15 31/12/16 30/9/17 30/9/18 Assets Non Current Assets Equipment 12,174 11,549 11,773 12.122 5 Current assets Cash Inventories Total Assets 4,000 570 16.744 28.083 450 40,082 43.855 670 56,298 7,926 820 0.868 7 Equity Share Capital Share Premium Account Retained Earnings Total Equity 29.997 -25,096 4.904 29.997 4.779 34.779 29.997 18.737 48.737 29.997 32.626 62.626 Long term Liabilities Loan due in 2019 1.000 1.000 10,000 Current Liabilities Loan due in 2016 Loan due in 2019 Trade Payables Tax due 1,840 1,858 2,445 1,877 4,684 1.000 1.896 5.346 Total Liabilities 5,303 7.561 8.242 Total Equity and Liabilities 16,744 40,082 56,298 70.868
