Prepare Income Statement And Balance Sheet For A Restaurant

Question

 

DEWEY, CHEETUM AND HOWE - FINE DINING

MASTER BUDGET PREPARATION

Because of your financial knowledge you have asked to prepare budgeted financial statements and supporting schedules for the restaurant's first year of operations. It has been suggested that you prepare this information for each quarter and for the year. You have been provided with the following researched information to help you with your preparation and you have also been provided with opening account balances as per section J.

 

A. Budgeted sales for each quarter and the year are as follows:                                                      

For the year                 $850,000                                                                                

1st quarter                   27%                 80%     is generated from food sales                                      

2nd quarter                  23%                 20%     is generated from beverage sales                               

3rd quarter                  20%                                                                            

4th quarter                   30%                                                                            

                                                                                                                       

B. Your fixed salaries for the year are………………$187,500        

Your variable salaries expressed as a percentage of sales are……………6.4%        

Your employee benefits program costs expressed as a % of total gross salaries……….11.5%        

All salaries are paid in the quarter in which they are incurred. Employee benefits are accrued and paid in the quarter after the accrual.                                                                                                        

                                                                                                                       

C. Your quarterly fixed rent expense which is paid on the first of each quarter is $3,975   

Your quarterly variable rent expense expressed as a percentage of sales is 4.9%     

Variable rent expense is accrued and is paid in the quarter after the benefit is received.                 

                       

D. Your total sales are comprised of:……….Credit card sales          72%    

………………….....………………...Cash sales                                19%

………………..………………Sales on account                               9%      

Your credit card commissions expense which is deducted by the financial institution is.. 3.1%     

Previous collection experience provides you with information on collection patterns as follows:    

Credit cards sales-in the quarter of sale………………………..81%

Credit card sales-in the quarter following sale………………....19%           

Sales on account are collected in the quarter following the sale.                                                                                                      

                                                                                                                       

E. The following other annual expenses have been given and are incurred evenly throughout the year and are paid                                                                                                            

quarterly as incurred:                                                                                                 

Advertising and promotion                              14,000             Miscellaneous                            1,200  

Bank charges                                                   1,800             Office                                       1,200  

Business tax and licenses                                 7,000             Professional fees                         6,000  

Delivery                                                          1,200               Printing                                    4,000  

Repairs and maintenance                                 4,000  

Laundry and uniforms                                      8,000               Supplies                                   2,000  

Telephone                                                        2,250               Travel                                     2,000  

                                                                                                                       

F. Utilities are paid quarterly and are incurred monthly as follows: Fixed    $375               

                                                                                                Variable           0.7%    of Sales          

                                                                                                                       

G. Your initial bank loan (see opening Balance Sheet) was obtained at an interest rate of…12.1%

and is paid each quarter along with the principal payment of……………………………….$15,000

You are required to maintain a minimum quarterly cash balance of………………………..$10,000

You have negotiated an operating line of credit of…………………………………………….$50,000

Your annual rate of interest on the operating line of credit is………………………………..19.0%

You may borrow and repay loan amounts in increments of………………………………….$1,000          

 

H. Depreciation on assets is as follows:                                                          Rate/Time       

Leasehold improvements        Declining balance method                                 25%

Kitchen and bar equipment     Declining balance method…………………… 25%

Furniture and Equipment        Declining balance method…………………… 25%

China and glass package         Straight line method - no salvage value……. 4 Years

                                                                                                                       

I. Cost of sales for food expressed as a percentage of food sales is………………………….38% 

Cost of sales for beverages expressed as a percentage of beverage sales is……………..25%         

The restaurant would like to maintain ending inventories based on an amount equal to a specific percentage of next quarters cost of sales:…………………….….for food                                  18.8% 

………………………………………………………………...…for beverages                    39.5% 

Combined projected food and beverage sales for the first quarter of year 2 are………$300,000   

All purchases of food and beverages are paid for as follows: In the quarter of purchase….70%    

………………………………………..……In the quarter following purchase…                 30%    

                                                                                                                       

J. The opening account balances as of the beginning of the current fiscal year, January 1, 2009:    

Inventory-food                                   $11,000     Interest payable                            $1,500            

Inventory-liquor                                     8,500     R.Dewey, capital                          65,891            

Prepaid insurance                                   3,600   O.Cheetum, capital                         65,891            

Service deposits                                     2,875   B.Howe, capital                              65,891            

Leasehold improvements                    368,000   M.E.Fine, capital                             65,891            

Kitchen and bar equipment                 130,000 Accounts payable                             19,500            

Furniture and fixtures                         125,000                                                                      

China and glass package                     10,000     Benefits payable                             725     

Operating line payable                        10,000     Bank loan payable-long term          314,886          

Bank loan payable-current                              60,000                                                                        

                                                                                                                       

K. It was decided that the restaurant would be called Dewey, Cheetum, and Howe - Fine Dining

 

L. Label your worksheets as follows: Sheet 1-SALES AND COLLECTIONS

Sheet 2-PURCHASES AND DISBURSEMENTS  

Sheet 3-CASH BUDGET

Sheet 4-INCOME STATEMENT

Sheet 5-BALANCE SHEET                                     

 

REQUIRED: 

(A). Prepare a sales budget for food and beverages for each quarter and the year.  

(B). Prepare a detailed schedule of cash collections for each quarter and for the year.                    

(C). Prepare a separate purchase budget for food and beverage for each quarter and the year.       

(D). Prepare a schedule of cash disbursements of inventory purchases for each quarter and the year.

(E). Prepare a cash budget for each quarter and for the year.                                               

(F). Prepare a budgeted income statement for each quarter and for the year.           

(G). Prepare a budgeted balance sheet for the end of the fiscal year.                                                                       

                                                                                                                       

Summary

The question belongs to Accounting and it discusses about preparing sales, purchases and distribution, cash budget, income statement and balance sheet for an organization.

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