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invested $16,000 cash each in the venture. The first transaction resulted in a one year lease being signed for $1,500 per month or $18,000 per annum. The owners occupied quarters above the Café. No rental amount was assigned to this apace. The owners then borrowed $21,000 from a local bank and then utilized $35,000 of the initial capital invested in the firm to purchase $53,200 of equipment as well as $2,800 of inventory (food and beverages). The partnership paid for an operating liscence in the amount of $1,428 as well as an additional $1,400 for a cash register (itemized as equipment) in our analysis. The remaining cash attributed to the partnership was $8,672 as per the Balance Sheet dated November 2nd, 2005. The partnership operated for a period of five (5) months after which the partnership was dissolved as of March 30, 2006. The second balance sheet shows the state of the partnership entity finances as of this date. Furthermore, a revised capital account as of March 30th, 2006 would show a loss versus the original capital invested in the partnership. See Question #3 further in this document for details with respect to this loss. Lastly, it should be noted that we have made an assumption that the entity will remain a ‘going-concern’ in our analysis. This is a critical assumption in that a valuation of the remaining equity and/or any write downs if the entity was liquidated would show different retained earnings that would be impacted by a forced liquidation of the entity’s equipment and inventory as well as an immediate payment of the notes payable, rent and accounts payable ($20,483). A forced liquidation would result in a greater loss to each partner’s shareholder equity. In affect, the operating partner, Mrs. Antoine, is essentially limiting the other two partners’ as well as her losses by operating the entity as a ‘going concern’ per her wishes. Lone Pine Café Balance Sheet As of November 2, 2005 Assets Current assets: Cash Inventory Total current assets Other assets: Property lease - prepaid expense Equipment Liscence - prepaid expense Total assets
$8,672 $2,800 $11,472 $1,500 $54,600 $1,428 $57,528 $69,000
Liabilities and Shareholders’ Equity Current liabilities: Notes Payable $21,000 Total current liability Shareholders’ equity: Paid-in capital: Mr. Henry Antoine, Capital Mrs. Antoine, Capital Mrs. Sandra Landers, Capital Total shareholders’ equity Total Liabilities and Shareholders’ equity
$16,000 $16,000 $16,000 $48,000 $69,000
Henry Antoine. 2006 Assets Current assets: Cash (account + register) $1.483 Shareholders’ equity: Paid-in capital: Mr. Further proceeds from the dissolution the partnership must be used to accommodate these liabilities. Capital $16.000 Retained earnings ($10. Capital $16.146 Total Liabilities and Shareholders’ equity $57.428/12 mo.000 Mrs. the equity paid to the partners would be secondary to accounts payable and the notes payable. The underlying factor is that the entity operated for a period of time.629 Liabilities and Shareholders’ Equity Current liabilities: Rent Payable $10.341 Inventory $2.771 Other assets: Accounts Receivable $870 Equipment¹ $54.854) Total shareholders’ equity $37.000 Mrs.858 Total assets $57.618 from their original investment.900 Accounts payable $ 1. This primarily results in a valuation of the equipment as of March 30th balance sheet and its view that the equipment is utilised in a going concern. Sandra Landers. Capital $16.445) Prepaid expenses ($1. This accounting would attempt to value the entity from the concept that the partnership is a “going concern” and not that the property is about to be liquidated. based on the calculation of retaining earnings as of March 30th. Antoine. 2006. *7 rem.600 Less depreciation ($2. . Lastly. 2005 under the understanding that they would share in the profits equally. The partnership resulted in a loss thus there is an equitable share of profit/loss once the entity is dissolved. Each owner invested an equally equitable sum into the partnership as of November 1st.583 Total current liability $20.) $833 $53.629 The owners would receive their proportionate share of equity or losses as of the March 30th.430 Total current assets $3.500 Notes payable $18. While not implicitly stating that they would share in losses in the partnership. 2006 it appears that each partner actually incurred a loss of $3.Lone Pine Café Balance Sheet As of March 30.
200/$71. [pic] [pic] Anthony Problem 5-7 a. but she must also find a way to lesson her expenses and generate more sales – therefore.583 (accounts payable) + $370 (which is the change from inventory of $2800-$2430) = $11.400 * .016 (purchase from suppliers) + $1. the business had a net loss. Antoine that during this accounting period for operating the business.100 + 32. Anthony Case 11-2: Amerbran Company (A) 1. and Problem 5-7 Anthony Cases 3-2: Loan Pine Café (B) 1. Antoine to continue to operate her business. 350 b. 2. in order for Mrs. providing her a positive net income. Therefore.100/($231. 2006. Below is the income statement for the Lone Pine Café from November 2.) Number of days’ cash on hand: [pic] Days’ cash = Cash/(Total cash expenses/365) = $23. Inventory (food & beverage) = $10.969.78 b. 2005-March 30. not only must she shore up her dissolved partnership and payoff the bank loan and accounts payable suppliers.300 = 0.300 = 1.480 (cash) + $870 (accounts receivable) = $44.000/365) = 36. (Please see in the following examples: the balance sheet with net change and then the cash flow statement). 11-2.800)/$71. Sales = $43.) Number of days’ worth of sales: Days’ receivables = Net receivables/ (Credit sales/365) = $32.76 Quick Ratio = Monetary current assets/Current liabilities = ($23. Quick & Current Ratios are found below: [pic] Current Ratio = Current assets/Current liabilities = $125.77/365) = 48 days .800/($323. This resulted as the business expenses grossly exceeded the total sales revenues. [pic] *Notes regarding two calculations: a. this income statement also validates the loss in cash during the same operating period found on the balance sheet.Anthony Cases 3-2. Since the income statement and the balance sheet are said to articulate with one another. This income statement communicates to Mrs.5 days c. Below is the state of cash flows for Amerbran Company for the year ended December 31. 20x1.