Class Notes (1,100,000)
CA (620,000)
Ryerson (30,000)
ACC 110 (70)
Lecture 5

ACC 110 Lecture Notes - Lecture 5: Convenience Store, Net Income, Financial Statement


Department
Accounting
Course Code
ACC 110
Professor
Marla Spergel
Lecture
5

This preview shows half of the first page. to view the full 2 pages of the document.
Kenaston Convenience Store
The Kenaston Convenience Store (KCS) is a local convenience store located near a subdivision
in Regina. KCS opened about three years ago and is owned and operated by the Wu family. The
store has been very successful and now that the neighbourhood has matured and the population is
large enough, a major chain of convenience stores, Community Mart Ltd. (CML), is interested in
buying KCS so that it can establish a presence in the area. It is CML’s usual practice to only
move into an area once the population density has reached a certain level. It prefers to buy out an
existing convenience store in an area because it gets the benefit of an established location and
eliminates a competitor.
You are CML’s location evaluator. It’s your job to make contact with the owners of
established convenience stores that CMS might be interested in and evaluate their suitability for
acquisition. Your preliminary evaluation of KCS is that it is a potential candidate for acquisition
and your initial discussions with Mr. Wu were favourable. Mr. Wu has agreed to allow you to
look at KCS’s most recent income statements. The income statements are presented below:
Kenaston Convenience Store
Income Statements for the years ended March 31
2009
2008
Revenue
$417,250
$368,425
Cost of sales
258,695
225,845
Gross Margin
158,555
142,580
Expenses
Amortization of capital
assets
32,000
34,200
Interest
15,200
17,400
Utilities
14,700
13,900
Other
7,500
6,200
Advertising and
promotion
6,200
4,500
Salaries and wages
2,000
2,200
Repairs and maintenance
4,150
2,750
Income taxes
12,565
5,400
Total expenses
94,315
86,550
Net income
$64,240
$56,030
In addition, you obtained the following information from your discussion with Mr. Wu and
from observing the business:
1 KCS is located in a two-storey, 30-old building located at the edge of the new subdivision.
The building cost $300,000 and there is a $210,000 mortgage on it. The Wu family lives in a
spacious apartment above the store. Mortgage payments and all utilities and property taxes for
the entire building are included in KCS’s income statements. The Wu’s own the building.
2 The store is open seven days a week from 7 AM to 11 PM. The store is always staffed by Mr.
You're Reading a Preview

Unlock to view full version