Chapter 2 Exercise: Developing Income Statement and Balance Sheet The Caribou Restaurant, privately owned and operated by Mr. Ivan Medom, was opened over a decade ago and has prospered ever since. The current owner has decided it is time to retire and wants to sell the restaurant. Samuel Lightree, vice president of development for a major restaurant company, has contacted the current owner with interest in purchasing the property. Samuel has requested a copy of the most recent income statement and balance sheet to help determine if the property would fit into his company's portfolio of restaurants. The following information has been provided by Mr. Medom: Information from the Income Statement for December 2017 Past year revenues were $2,200,000 with food accounting for 80% of sales. Cost of sales were 32.62% of total sales with a food cost of 37.1% and a beverage cost of 14.7% Expenses as a percentage of total sales were provided by Mr. Medom Annual Rent is $154,000 . . Salaries & Wages Depreciation Interest Marketing General & Administrative 30.0% 2.0% 0.5% 2.1% 3.0% Employee Benefits Direct Operating Expenses Music & Entertainment Utilities Repairs & Maintenance 3.9% 5.7% 0.1% 2.5% 2.0% Information from the Balance Sheet as of Year End 2017 FF&E Long-Term Investments Accounts Payable Accounts Receivable Accumulated Depreciation Other Current Liabilities Inventory Long Term Debt - Current $356,758 $363,961 $104,233 $ 35,455 ($281,514) $ 25,203 $ 50,834 $289,203 Current Portion of Long-Term Debt Prepaid Expenses Building Accrued Expenses Owner's Equity Cash Retained Earnings $17,941 $31,611 $100,388 $ 43,572 $ 56,021 $ 66,213 $187,533 Caribou Restaurant Income Statement 2017 $ $ % SALES Food Beverage Total Sales COST OF SALES Food Beverage Total Cost of Sales GROSS PROFIT Food Beverage Total Gross Profit OPERATING EXPENSES Salaries & Wages Employee Benefits Direct Operating Expenses Music & Entertainment Marketing Utility Services General & Administrative Repairs & Maintenance Total Operating Expenses NON-CONTROLLABLE EXPENSES Rent Depreciation Interest Total Non-Controllable Expenses Income Before Taxes Caribou Restaurant Balance Sheet 2017 Accounts Payable Current Portion of Long Term Debt Accrued Expenses Other Current Liabilities Total Current Liabilities s Cash $ Accounts Redevable Inventory Prepaid Expenses Total Current Assets $ FF&E Accumulated Depreciation Building Long-term Investments Long-Term Assets $ Long-Term Debt Less Current Owner's Equity Retained Earnings Total Owner's Equity S Total Liabilities & Owner's Equity $ Total Assets $ $
