3 months ago, on 1st July 2018 Michael and Roberta purchased a Caf with 5 accommodation cabins in a bush location 60 minutes West of Sydney. The area is popular with bush walkers and nature lovers. Michael and Roberta took out an interest only loan of $250,000 to purchase the business at an annual interest rate of 6% with interest payable monthly and they contributed $50,000 of their own cash to the business. After purchasing the business, Michael and Roberta discovered that the previous owners had not been completely truthful with the condition of the cabin beds, lounges and Air conditioners / heaters. Michael and Roberta are considering replacing these items in 3 of the cabins, and this will cost a total of $15,000. All of the equipment that was included in the purchase is depreciated at $3,200 per month. On 1st July 2018, Michael and Roberta purchased a 12 month insurance policy for public liability, fire and flood protection at a cost of $18,000. The business for the Caf is off the street, and the cabins are booked directly with Michael and Roberta. All of the payments are in cash, and each week, the cash revenues (caf and cabins) are reconciled and banked. Inventory stocks are also reconciled each week for the food and beverages that are sold in the Caf. The cabins are sold on a weekly basis only, and are therefore cleaned once a week. The cleaner is paid $50 to clean each cabin. In order to promote the cabins, Michael and Roberta started a 6 month social media / digital advertising campaign, using a digital advertising agency. This was started on 1st September 2018 at a cost of $3000. Each Cabin is rented out at $750 for the week. Michael and Roberta are holding a group booking for the ICMS Bush Walking Club in September. The walking club has booked all 5 cabins. The Walking Club has already paid a deposit of $1875 (this was paid in August). Roberta a Michael have extended ICMS 30 days credit, meaning the balance will be payable 30 days after their stay. Roberta and Michael purchased a Toyota Landcruiser 4WD on 1st July 2018 to drop off and pick up guests in the surrounding bush. They paid $30,000 for the vehicle. It is depreciated monthly, using the straight line method over its useful life of 5 years, after which time it will have a salvage value of 6,000. Bush Providores delivers all of the Cafs inventory supplies every 2 weeks on a 14 day account. Roberta and Michael each earn a salary of $6,000 per month, however Michael has not paid himself since buying the business (July and August). Roberta and Michael employ their 2 children, Alice and Camilla, who work in the Caf. They are each paid $975 per week. At the end of September a stock take was conducted on the General and Office Supplies store, and it was found that $250 worth of supplies remained. As at the end of September, the business had not received the electricity bill for September, so it was decided to accrue the electricity expense for September based on the August electricity bill ($2150). The bank statement for Michaels bush caf and cabins arrived by mail on 30th September and confirmed that the monthly interest on the $250,000 loan was deducted from the bank account on 30th September. There will need to be a provision (accrual) made for this interest. The business has been going well, but it has been taking its toll, working 7 days per week, so Roberta has been urging Michael to pay his own salary backpay and take a 1 week holiday. Michael is also thinking about buying a 6th cabin to capitalize of the potential extra business from the digital media campaign. Roberta and Michaels son, John, is enrolled in a Business Degree at ICMS, and his parents thought he could help them analyse the business to give them a better understanding of the business and whether they should a). refurbish 3 of the cabins ($15,000), b). Pay the back pay to Michael ($12,000), c). purchase a new cabin at a cost of $20,000. What do you think they should do? Today is the 30th September 2018.