PROJECT CASE: BACKGROUND Adam Kleen Enterprise (AKE) was initially set up as a convenience shop selling laundry related items by Adam Bollan. Despite having good results in the national-level examination and was even offered a place at a public university, he decided to pursue his ambition of becoming a successful entrepreneur. It all started with a humble beginning of selling detergents and fabric softeners. Soon, it was followed by personalized delivery to the doorsteps of his customers based on the latter schedules. This has certainly created a satisfied and growing number of newer customers and within a year, AKE has doubled the items in the shop to meet higher demands. AKE was a given breakthrough when it successfully won a tender to provide detergents and softeners for a laundry service contractor of a local government hospital. From here, there was a no turning back for Adam as he steered AKE into other related services such as selling specially packed detergents and fabric softeners, medical disposables, and other relevant rental services. When the Covid-19 pandemic hit the country, AKE was given another business opportunity of supplying personal protective equipment (PPE) to the hospital employees. Adam Kleen Enterprise Trial Balance 31 December 2020 Accounts Balances (RM) Debit Credit 567,000 Cash Adam Klean Enterprise Trial Balance 31 December 2020 Accounts Cash Account Receivable Merchandise Inventory Office Supplies Sale Supplies Pre-paid Insurance Office Equipment Accumulated Depreciation - Office Equipment Delivery Van Accumulated Depreciation - Delivery Van Account Payable Salaries Payable Interest Payable Unearned Revenue Notes Payable Capital, Mr. Adam Withdrawal, Mr. Adam Sales Balances (RM) Debit Credit 567,000 180.875 404,813 4,000 6,875 72,975 288,750 85,113 378,875 151,125 329,275 10.625 7,037 19,350 281,250 684,000 27,500 929,887 Cost of Merchandise Sold Advertising Expense Local municipal license Depreciation Expense - Office Equipment Depreciation Expense - Delivery Van Delivery Van Repairs & Maintenance Sales Salaries Expense Sales Supplies Expense Insurance Expense Office Salaries Expense Office Supplies Expense Rental Expense Utility Expense Interest Expense 445.174 9,113 2,750 3,000 3,875 3,125 41,563 8.560 5,625 12,162 3,862 10.625 3,237 1.875 TOTAL 2,497,662 2,497,662 Additional information: The following items are related to cash transactions throughout the year. Cash and cash equivalents as of 1 January 2020 was RM554,500 a) Adam made a total cash withdrawal of RM27,500 in 2020. b) AKE received cash RM10,000 from the disposal of an old van. c) An additional cash of RM150,000 was brought in by Adam to increase his stake in AKE d) AKE bought a piece of land for future operational expansion. A total amount of RM180,000 was paid in cash. e) Total cash receipts and disbursements from the business operation were RM315,000 and RM255,000 respectively. PART C: 1. With the rapid expansion of the AKE business, Adam is contemplating the idea of opening one more branch at a strategic location in a new housing area. The options available are either to rent the premises or to buy them. For the rental option, it will cost AKE about RM3,500 a month for a single unit. On the other hand, the price of a single shop lot is RM450,000. The deposit required is RM50,000 for a unit while the balance will be financed through a bank loan for 20 years with an estimated monthly loan instalment of RM2,800. Critically assess these two options and explain to Adam how each of the options will be impacting the operational costs of AKE (3.5 Marks) Adam is undecided whether to buy a higher volume of cleaning inventories for a better price from the suppliers or keep its existing practice of buying as-when-needed basis. The former will require additional space to store the inventories while the latter is sufficient with the existing facility. Analyze and explain to Adam what benefits and shortcomings of these two options