5. Prepare a projected income statement and statement of financial position for the year ending April 30, 2013 if the Calgary Farmers Market alternative is accepted. Put your calculations/financial statements in the appendix but reference/explain them in your report.
6. Prepare a projected income statement and statement of financial position for the year ending April 30, 2013 if the company focuses on growing internally and does not sell at the Calgary Farmers Market. Put your calculations/financial statements in the appendix but reference/explain them in your report.

Xaragua would open for business every weekend (Friday, Saturday and Sunday). Customers would be able to purchase their coffee in four formats: (1) a 12-ounce cup of brewed coffee for $2.50; (2) a 16-ounce cup of brewed coffee for $2.75; (3) a half-pound bag of roasted coffee for $12, or (4) a one-pound bag of roasted coffee for $20. All purchases would be paid for with cash, debit or credit card, so Lehnert expected no accounts receivables or bad debts for the proposed venture. While talking to a previous owner of a coffee kiosk at the Farmers Market, on a monthly basis, Lehnert believed the company would sell 700, 12-ounce cups of coffee; 340, 16-ounce cups of coffee; 80 half-pound bags of coffee; and 65 one-pound bags of coffee. In addition to these kiosk sales, Lehnert predicted that Xaraguas online retail sales would also grow by 50 per cent over the second full year of operations (fiscal 2012).

Xaragua purchased its coffee beans from its Haitian supplier on account, and the supplier extended credit terms of net 60 days. The cost of the coffee depended on its state when sold. The variable cost of a 12-ounce cup of coffee was $0.38, while a 16-ounce cup of coffee had a variable cost of $0.46. The variable cost of a half-pound bag of coffee was $3.61, while a one-pound bag of coffee had a variable cost of $6.56. Lehnert planned to earn the same gross margins on his online sales as were earned in fiscal 2011. He also planned to maintain a 200-day inventory of coffee beans at all times. Lehnert planned to rent a kiosk from the Farmers Market to sell Xaragua coffee, beginning June 1, 2012. Rent for the year would total $4,080, with first and last months rent due immediately. The space would need $7,415 in furnishings and fixtures. These items would be depreciated using the straight-line method over 10 years and would assume no residual value. A truck would also be required and would cost $17,000. This truck would be depreciated using the straight-line method over seven years and would assume a residual value of $1,000. All other anticipated annual costs are given in Exhibit 4. Lehnert planned to pay all costs in full by fiscal year-end. Any income taxes owing on this business would have to be paid six months after the fiscal year ended. Lehnert would work the kiosk each weekend and pay himself a salary of $2,840 each month, payable on the last day of the month. Before any payouts would be made to the three partners, Lehnert thought he would wait until the business was well established in the Calgary market and proved to be sustainable enough to support dividends.

Exhibit 1 PROFIT AND LOSS STATEMENT For the year ending April 30, 2012 Sales $ 200,000 Cost of goods sold 20% 40,000 Gross profit $ 160,000 Operating expenses Rent Marketing Salary Machine maintenance Internet and phone Depreciation Total operating expenses Pre-tax income 54,985 16,800 25,000 6,000 3,600 25,867 132,252 27,748 Income tax' 6,937 Net income $ 20,811 Source: Company files. Exhibit 2 STATEMENT OF FINANCIAL POSITION As at April 130 2012 ASSETS $ Current assets: Cash Inventory Prepaid rent 2,342 22,222 4,582 $ 29,146 Long-lived assets General equipment Less: Accumulated depreciation $ 35,000 8,750 26,250 Roasting equipment Less: Accumulated depreciation 51,700 8,617 43,083 Furniture Less: Accumulated depreciation 35,000 7,000 28,000 Fixtures & furnishings Less: Accumulated depreciation 12,000 1,500 10,500 107,833 Total assets $ 136,979 LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Accounts payable Income taxes payable $ 9,231 6,937 $ 16,168 Shareholders' equity: Common stock Retained earnings 100,000 20,811 120,811 Total liabilities & shareholders' equity $ 136,979 Exhibit 4 PROJECTED ANNUAL COSTS FARMERS' MARKET $ 960 960 Gas Internet and phone Miscellaneous Marketing Total 2,400 2,000 $6,320 Exhibit 1 PROFIT AND LOSS STATEMENT For the year ending April 30, 2012 Sales $ 200,000 Cost of goods sold 20% 40,000 Gross profit $ 160,000 Operating expenses Rent Marketing Salary Machine maintenance Internet and phone Depreciation Total operating expenses Pre-tax income 54,985 16,800 25,000 6,000 3,600 25,867 132,252 27,748 Income tax' 6,937 Net income $ 20,811 Source: Company files. Exhibit 2 STATEMENT OF FINANCIAL POSITION As at April 130 2012 ASSETS $ Current assets: Cash Inventory Prepaid rent 2,342 22,222 4,582 $ 29,146 Long-lived assets General equipment Less: Accumulated depreciation $ 35,000 8,750 26,250 Roasting equipment Less: Accumulated depreciation 51,700 8,617 43,083 Furniture Less: Accumulated depreciation 35,000 7,000 28,000 Fixtures & furnishings Less: Accumulated depreciation 12,000 1,500 10,500 107,833 Total assets $ 136,979 LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Accounts payable Income taxes payable $ 9,231 6,937 $ 16,168 Shareholders' equity: Common stock Retained earnings 100,000 20,811 120,811 Total liabilities & shareholders' equity $ 136,979 Exhibit 4 PROJECTED ANNUAL COSTS FARMERS' MARKET $ 960 960 Gas Internet and phone Miscellaneous Marketing Total 2,400 2,000 $6,320