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Teaching Since: | May 2017 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
2. A&S retail shop. Andy and Stewart met at a training course for young en- trepreneurs. They decide to set up an enterprise to run a retail store at the centre of a small village. Andy recently received £9000 as a donation from his rich aunt. He puts this money and another £3000 of his savings into the business as share capital. Stewart puts in £12 000 of his own savings as share capital as well. A local bank grants them a three-year loan of £6000. Every six months, they repay one-sixth of the bank loan and pay interest at a semi- annual rate of 3 per cent. The interest is recognized on a six-month basis. They rent a fully equipped store with sufficient storage space. They agree to pay a monthly rent of £700 (to be paid at the beginning of each month). Andy and Stewart pay themselves a salary of £600 each at month’s end. They decide to use their initials to create the store’s name: A&S.
n To announce the opening of the store on the first of April 20X1, A&S launches an advertising campaign which runs during the first week of April. This campaign costs £1000 and is to be paid for on April 7.
n A&S purchases retail goods worth £7000. The supplier agrees to grant a 10 per cent discount if A&S pays immediately on April 1.
n The first month turns out to be a success due to the advertising campaign.
A&S is able to sell half its inventory for £4900.
n At the beginning of May, A&S purchases retail goods worth £5000 in cash.
n By the end of the May A&S manages to sell £3500 of goods for £5400.
n In the month of June, A&S decides to provide several shopping carts to improve customer comfort. A&S buys 20 carts for only £1200. The carts are delivered on June 5 and will be paid for mid-July. A&S estimates the expected life of the carts to be five years without any residual value.
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n In June, A&S sells £2900 of goods for £4500. A&S also buys retail goods for £5000 and receives a promotional quantity discount of 7 per cent. The goods are paid for when delivered on June 20.
n The availability and convenience of shopping carts attract a broader range of customers. In the month of July, A&S sells £4500 of retail goods for £7200.
n At the beginning of August, A&S buys £4800 of goods and sells £3800 goods for £5800.
n Eager to expand its business, A&S responds to an increasing demand for more customer convenience. In order to provide a home delivery service, A&S buys a second-hand motor van for £15 000 on August 4. A&S estimates that the van will be used for five years, after which the van will have no residual value. A&S pays £12 000 immediately and agrees to pay the remaining balance before August 20X2.
n A&S buy retail goods for £6500 in September. A&S sells £3500 of goods for £5000 at the store. Furthermore, A&S delivers £750 of goods using the van and gets paid £1200.
n At the end of the month, A&S repays part of its borrowings and pays the interest to the bank.
n In October, A&S experiences a slight downturn in sales. A&S manages to sell only £2000 of goods for £3400 at the store and delivers £750 of goods to customers at home for £1200. Given this disappointing decrease in sales A&S buys only a minimum of goods and pays £1250.
n During the month of November, A&S grants promotional discounts to get rid of products near to their expiring dates. A&S sells in total £2400 of goods at a price of £2600.
n At the beginning of December, A&S purchases a considerable quantity of goods to provide for the holiday shoppers. A&S buys £8500 of goods and gets a 5 per cent discount for immediate payment.
n December turns out to be a lucrative month. A&S temporarily hires a student on a part-time basis to help out in the store. A&S pays the student £300 at the end of the month. A&S sells £6500 of goods for
£9900 at the store. On top of that, home deliveries (with a cost of £1800) account for £3200 in revenue.
n A&S believes the owners have been working hard and rewards them with a new year’s bonus of £300 each.
n In January, A&S replenishes its inventory. A&S purchases £4000 of goods.
In January A&S sells £3700 of goods for £6300 all together.
n In February, A&S decides that the store requires a portable computer for administration purposes. A&S buys a portable computer at a price of
£1350. The computer is expected to last three years and to have no value afterwards.
n At the beginning of February, A&S purchases £5000 of goods. A&S sells
£4500 of goods for £7850 at the store and another £850 of goods by delivery for £1500.
n In March, A&S relies upon an accountant’s services to help them with the preparation of their financial statements. A&S pays him £500. During this month A&S purchases another £5000 of goods and succeeds in selling
£4600 of goods for £7900.
n At the end of the month, A&S repays part of its loan and pays the interest to the bank.
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The fiscal year of A&S runs from April 1 20X1 till March 31 20X2.
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You are asked to prepare for A&S a statement of financial position at the end of March 20X2 and draw up a statement of profit or loss for its first fiscal year.
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