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# SOLUTION FOR LONE PINE CAFE CASE:

A)Each of the partners contributed \$16000 cash to the partnership and agreed to share in their profits proportionally to what they had invested which amounts to 1/3rd of the total profit. Therefore, each Owners equity : \$16000 cash They signed a one year lease at a nearby cafe called the Lone pine cafe and agreed to pay a rent of \$ 1500 every month. The partners borrowed \$21000 from the bank . They used \$35000 out of their partnership money and loan from the bank to buy equipments worth \$53200 plus \$ 2800 for Inventory ( food and beverages). Also they paid additionally \$1428 for local operating license and \$ 1400 for a new cash register. Thus the money remaining from their partnership account is : o \$48000- \$( 35000+1428+1400)= \$ 10172

Lone Pine Cafe Statement of Financial Position As of Nov 2nd, 2009 Assets Cash Inventory Prepaid license expense Total current assets Non current assets: Property, plant and equipment Cash register Total Total Assets: 53200 1400 54600 69000 10172 2800 1428 14400 Total liability Owner's Equity: Mr. Antoine'sEquity Mrs. Antoine's Equity Mrs. Sandra Lander's Equity Total Equity Total liabilities and owner's Equity 21000 16000 16000 16000 48000 69000 Liabilities Payable to Bank 21000

B) On March 31st , 2010, Mrs Antoine discovered that Mr Antoine and Mrs landers were missing. She considered the partnership to be dissolved and thus brought in an accountant to resolve the matter. Mr Antoine and Mrs landers had taken away the cash register plus \$311 cash in it.

Thus total equipment cost = \$( 54600-1400) = \$ 53200 Thus total loss= cost of cash register + cash in it = \$( 1400 + 311) = \$ 1711 There fore, Mr Antoine withdrawals= \$ 1711/2= 855.50 Mrs landers withdrawals= \$ 1711/2= 855.50 Checking account balance= \$1030 Ski instructors payment= \$ 870 Total cash = \$ 1900 Mr Simpson ( The accountant ) calculated the depreciation on the equipment to be \$ 2445. Net cost of equipment= \$( 53200-2455)= \$ 50755 Lone Pine caf owed suppliers = \$ 1583 Food and beverages on hand were estimated to be about \$2430. Inventory = \$ 2430 The partnership had repaid \$2100 of the loan from Bank. Thus loan remaining: \$( 21000-2100)= \$ 18900 The prepaid local operating expense had been used for 5 months. Thus this should be subtracted from the remaining amount. 1428/12= \$ 119 per month For 5 months: \$ 119* 5 = \$ 595

Amount remaining: \$ ( 1428-595) = \$ 833 During the period of the operations, the partners withdrew agreed upon salaries and these payments were upto date. Mr Antoine left behind his clothes which were estimated to be about \$750. Mr Simpson thus prepared a balance sheet as of March 30 th 2010. He listed the items they owned as of Mar 30 th, listed the items they owed and the balance was divided among the three equally as equity.
Lone Pine Cafe Statement of Financial Position As of Mar 30th, 2010

Assets Cash Inventory Prepaid expense Total Current assets Non current assets: Equipment Less: Accumulated depreciation 1900 2430 833 5163

## Liabilities Payable to Bank Loan from local suppliers 18900 1583

Total Liability

20483

Owner's Equity Mr Antonie's Equity 53200 Mrs. Antoine's Equity -2445 Mrs. Lander's equity Mr Antonie's withdrawal Mrs landers's withdrawal 50755 Total Equity Total Liabilities and Owner's 55918 Equity:

## c) We see from the balance sheets that their partnership would

not have been able to receive their proportional share of equity disregarding the marital complications.