In: Accounting
Melissa Parker is considering the merits of buying a small café in Adelaide. The café is fully furnished and equipped. The business has been operating for the last 3 years. The café premises are not owned, but leased. The current lease expires in two years, but there are options for a further five-year term in place. The current lease costs $30,000 per annum in rent.
The current owner, Philip Taylor, started the business in 2017 with a capital of $75,000. He is asking for a price of $100,000 for the business. Philip provided the following information:
Table 1 : info for the year |
|
Sales revenue |
400000 |
Cost of sales |
175000 |
Gross profit |
225000 |
Other expenses |
277000 |
loss |
-52000 |
Upon a request from Melissa, Philip provided the following information about the ‘other expenses’ of $277,000 from the records of the business:
Table 2 Information about other expenses
Coffee machine |
$ 100000 |
|
insurance |
6000 |
|
Computer & software |
15000 |
|
Telephone usage |
4000 |
|
Interest paid to bank |
2000 |
|
Car maintenance expense |
8000 |
|
furniture |
50000 |
|
Servicing of coffee machines |
8000 |
|
internet |
2000 |
|
electricity |
10000 |
|
Water bill |
7000 |
|
Advertising & membership |
25000 |
|
Lease rent |
30000 |
|
Shop cleaning |
10000 |
|
Total |
$ 277000 |
In addition, Philip informed the following:
Following detailed discussions with Philip, Melissa discovered that:
Questions
Note : Opening capital is not available from records, the figure of Capital in balancing figure.