Dry Clean Website Ltd. Composition

Circumstance Assignment #1

Case 12-1

Russell D'Cunha Student #100443790 Busi 3102U-002|

Due Date: January twenty fourth, 2013

Dust Depot Limited


Dry Clean Depot is a private firm, Max the CFO features asked me (Professional Accountant) to analyse any kind of accounting significance with concerning a new mortgage and other issues within the firm. Dry Clean Lager Limited (DCDL) has chosen to record under the restrictions of IFRS, although they would have elected ASPE as their reporting standards, because they are a private firm. DCDL is a company with forty five dry washing stores in southern Ontario. DCDL offers revenues of around $7 Million. DCDL offers arranged for a $2, 000, 000 mortgage for the purchase of some new equipment pertaining to the business. The covenants with the new bank loan are as follows: * Optimum 2-to-1 debt-to-equity ratio

* Minimum funds balance of $500, 000

* Optimum dividends of $100, 500 per year



IFRS states that " A great onerous contract is a contract in which the inevitable costs of meeting the obligations within the contract go over the monetary benefits anticipated to be received under it. ” The lease from the Sudbury price tag location is usually therefore a great onerous agreement. DCDL has a obligation to pay $27, 500 each year for the lease on the Sudbury location. The sub-contract agreement DCDL has is a sub-lease that pays $5, 000 to get year 1, and $5, 000 annually for the next 36 months, plus 10% of product sales over $150, 000. A liability with the difference $27, 500 and $5, 000 will need to be recorded $22, 500/ year, today, in accordance with enough time value of money; as this is something special obligation of the company, IFRS states that a liability will need to be recorded. This will worsen the debt-to-equity rate, which is not lined up with management's objectives. Toxins Issue:

DCDL uses perchloroethylene (perc) in the cleaning process in eight of their operating sites. This chemical is a hazardous air poison. There is a great...