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ACC100 Group Assignment T1_2019 – Case Study: Sally’s Café at
Shelly Beach.
Background
3 months ago, on the 1 July 2018, Sally and Nick Matthews purchased a beachside Café at Shelly Beach
near Manly, called Sally’s at Shelly. Unfortunately, the business hasn’t been as successful as the
previous owner indicated. The rent is high and location is a bit remote. This is a problem because,
when the Matthews purchased the business, they not only took out a $150,000 interest only loan
from the bank – at an annual interest rate of 10% with interest payable monthly – they also
convinced their best friends, John and Paige Nichols, to invest $75,000 with a promised dividend of
10% p.a., payable every 3 months. The bank loan comes with a small overdraft facility. In July they
had to spend of money on inventory – because the previous owners had run down stock levels and
purchase six months of insurance (purchased from July 1st 2018) costing $1,260, both of which
negatively impacted cash flow. Lastly the previous owner was a bit loose with the truth when it came
to the condition of the equipment in the store. Nick now knows they are urgently in need of a new
refrigerator and deep fryer, which they could purchase from Essential Ingredients Co. for $6,500. The
old equipment is depreciated at $1,600 per month. Document Preview:

ACC100 Group Assignment T1_2019 – Case Study: Sally’s Café at Shelly Beach. Background 3 months ago, on the 1 July 2018, Sally and Nick Matthews purchased a beachside Café at Shelly Beach near Manly, called Sally’s at Shelly. Unfortunately, the business hasn’t been as successful as the previous owner indicated. The rent is high and location is a bit remote. This is a problem because, when the Matthews purchased the business, they not only took out a $150,000 interest only loan from the bank – at an annual interest rate of 10% with interest payable monthly – they also convinced their best friends, John and Paige Nichols, to invest $75,000 with a promised dividend of 10% p.a., payable every 3 months. The bank loan comes with a small overdraft facility. In July they had to spend of money on inventory – because the previous owners had run down stock levels and stpurchase six months of insurance (purchased from July 1 2018) costing $1,260, both of which negatively impacted cash flow. Lastly the previous owner was a bit loose with the truth when it came to the condition of the equipment in the store. Nick now knows they are urgently in need of a new refrigerator and deep fryer, which they could purchase from Essential Ingredients Co. for $6,500. The old equipment is depreciated at $1,600 per month. Most of their day to day business is from “off the street and off the beach” customers who pay with cash. They reconcile the cash registers and inventory stocks at the end of each week. Because the retail business isn’t going so well, the Matthews started a 6 months social media campaign starting stfrom 1 September 2018 to promote the catering side of the business, this cost $1,950. In September they catered two functions, one at the Manly Surf Club and another for a rich lady, Madam Bloat, in Seaforth. They charged $75 per head and estimated costs are $40 per head. Clients need to pay a 30% deposit, with the balance payable one week after the…

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