McDoner's is a business in Canterbury selling kebabs, burgers, pizza and fish. Very occasionally it also sells some salad. It was launched on 1 January 2015, and has built its reputation as selling cheap food to not-very- health-conscious students. You work for SL Accounting Services, and McDoner's is one of your clients. You are to prepare accounts for the year ended 30 September 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 the September 810 3 years 162 E709 E10,000 15 years 1 000 57.751 E2.000 7 years NI 1.214 Moped for 17/2018 deliveries Cooking 1/1/2015 Equipment Refrigeration 1/1/2016 equipment Furniture 1/1/2018 Cash register, 1/1/2018 computer printer 1,620 3.456 3 years 3 years NB 54 1218 1.230 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 TexTok 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 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 TexTok 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 result McDonare lost 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 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. 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 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. Your task You work for SL Accounting Services, and McDoner's is one of your clients. You should prepare the advice requested below, following SL's presentation standards (details of which are given on Moodle). (a) Calculate the amount of depreciation in the period to 30 September 2019 for each asset held during the year, and calculate the value of those assets at 30 September 2019. (b) Prepare a Statement of Income for McDoner's for the Period ending 30 September 2019, and the proposed dividend. (c) Calculate the amount of Cash or Overdraft that must be being held at 30 September 2019, using the Accounting Equation. (d) Prepare a Statement of Financial Position for McDoner's at 30 September 2019. McDoner's is a business in Canterbury selling kebabs, burgers, pizza and fish. Very occasionally it also sells some salad. It was launched on 1 January 2015, and has built its reputation as selling cheap food to not-very- health-conscious students. You work for SL Accounting Services, and McDoner's is one of your clients. You are to prepare accounts for the year ended 30 September 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 the September 810 3 years 162 E709 E10,000 15 years 1 000 57.751 E2.000 7 years NI 1.214 Moped for 17/2018 deliveries Cooking 1/1/2015 Equipment Refrigeration 1/1/2016 equipment Furniture 1/1/2018 Cash register, 1/1/2018 computer printer 1,620 3.456 3 years 3 years NB 54 1218 1.230 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 TexTok 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 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 TexTok 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 result McDonare lost 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 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. 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 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. Your task You work for SL Accounting Services, and McDoner's is one of your clients. You should prepare the advice requested below, following SL's presentation standards (details of which are given on Moodle). (a) Calculate the amount of depreciation in the period to 30 September 2019 for each asset held during the year, and calculate the value of those assets at 30 September 2019. (b) Prepare a Statement of Income for McDoner's for the Period ending 30 September 2019, and the proposed dividend. (c) Calculate the amount of Cash or Overdraft that must be being held at 30 September 2019, using the Accounting Equation. (d) Prepare a Statement of Financial Position for McDoner's at 30 September 2019