Trading Profit and Loss Account and balance sheet

CLOUD 9 COMPANY CASE STUDY (75 marks) Cloud 9 Co. is an Irish sports shoes manufacturer. It has recently seen a decline in profitability owing to Covid 19. As a result, Cloud 9 is faced with having to suspend its operations immediately unless it can find alternative markets to ensure the business can remain operational. The window to implement a new plan is very tight. Luckily, the production and sales directors had already assembled a team to devise a plan, referred to as 'Go Online,' to diversify the business away from its reliance on the direct retail market. While much of the outline of Go Online is ready, it still requires input from the finance department. Although the team had intended to present Go Online at a strategy conference planned for later this year, events have now overtaken them and an emergency meeting of Cloud 9's senior management team has been called for next week. The principle agenda items are an assessment of the current level of stress on the firm's liquidity and a discussion of the proposed Go Online which, it is hoped, can go into production quickly. You have ascertained the following information to assist with your assessment: Cloud 9 is registered for VAT and charges 23% VAT on its sales. VAT returns are submitted on-line following the end of each (calendar) two monthly period and payment is made by MIA the 23rd of the relevant month. in Heb - March May Ignore taxation other than VAT. A loan of 69,000,000 was taken out with Irish Bank pic on 18 Apr 2015 and is repayable in full on 1st Apr 2025. The interest rate on the loan is 10% per annum, payable quarterly on 18 January, 14 April, 1st July and 1st Oct each year. 69m 8107 - 6.4m All Cloud 9's sales and purchases are on 30-day credit terms. All other expenses are paid immediately on receipt of invoice. Cloud 9 depreciates it's property, plant & equipment on a straight-line basis as follows: Buildings 40 years Machinery 20 years o Delivery vans 5 years Fixtures & fittings 10 years Office furniture & equipment 10 years The following appendices are included: o Appendix 1: Trial balance extracted from Cloud 9's records @31st March 2021. O Appendix 2: Details of Go Online's new manufacturing line and financial projections for the six months from 1st April 2021 to 30th September 2021 Appendix 3: Abridged financial statements for two previous years to 31st March 2020 and 2019. O . Please note that whilst your report package is to include specified statements and reports, it is necessary to include all relevant data and conclusions into the financial assessment to ensure that the full economic impact is considered. Appendix 1 -Trial Balance 31st March 2021 Trial Balance as at 31st March 2021 000 000 50,000 206,655 69,000 100,000 25,000 85,000 12,750 18,500 7,400 14,000 4,200 13,500 5.400 147,500 87,300 Share capital Retained earnings @31 March 2020 Loan Building (cost) Building accumulated depreciation 31st Mar 2020 Machinery (cost) Machinery accumulated depreciation 31st Mar 2020 Delivery vans (cost) Delivery vans accumulated depreciation 31st Mar 2020 Fixtures & fittings (cost) Fixtures & fittings accumulated depreciation 31st Mar 2020 Office furniture & equipment (cost) Office furniture & equipment accumulated depreciation 31st Mar 2020 Inventory @ 1 April 2020 Trade receivables Bank overdraft Trade payables VAT payable Sales revenue Purchases Wages and salaries Light and heat Selling expenses Advertising Client entertainment Legal and professional fees Maintenance and repairs Motor expenses Office expenses Interest expense 15,950 45,700 6,220 - 230 370,000 248,750 62,500 7,250 6,500 3,000 2,750 1,500 4,800 6,500 3,750 5,175 818,275 818,275 . On 31st March 2021 the following expenses had not been accounted for. Cloud 9 plans to pay the outstanding amounts in April 2021. Wages.overtime for March 2021 3,200,000 Petrol for delivery vans (inclusive of VAT @ 13.5%) 150,000 cannot claim) o Legal fees (inclusive of VAT 23%) 1000,000 61,230,000 VAT(130,ooo) Inventory on hand @31st March 2021 is valued at 171,250,000 Amounts due from trade receivables at 31st March 2021 are expected to be received 50% in April and remainder in May. cash budget Amounts due to trade payables at 31st March 2021 are expected to be paid in full in April. cash budget