Seafood Cuisine, Inc.

Required Assignment: Financial Statements Preparation

In this assignment, you must prepare Seafood Cuisine Inc.$$s financial statements.

Learning Objectives

The goal of this assignment is for you to demonstrate your understanding of the relationship that exists between real$-$life financial events and their inclusion in financial statements. Upon the completion of this exercise, you should be able to:

Analyze a business narrative to extract the financial information necessary to present the financial position, results of operations, and cash flows of an organization.

Identify the entries necessary to record financial transactions

Classify financial transactions for their inclusion in the financial statements

Prepare professionally looking financial statements $($income statement, balance sheet, statement of stockholders equity, and statement of cash flows$).$ The intermediate accounting textbook has multiple examples showing the proper format you must follow. You can also look at financial statements filed in $10-$Ks submitted to the SEC.

About Seafood Cuisine, Inc.

In January $2023,$ Mackenzie and Sophia Sidgman, co$-$owners of Seafood Cuisine, got together to discuss the expansion of their restaurant from a single location in Sacramento, CA$,$ to LA$.$ This restaurant would be called LA$$s Seafood Kitchen. Although the Sacramento Restaurant had been open for only two years, it had a loyal customer base from neighboring businesses and the California State University $($CSU$).$ Despite the restaurant$$s success in Sacramento up to this point, Mackenzie and Sophia knew they would need to borrow money to finance the new restaurant. They also understood that they would be expected to present a set of current financial statements as part of any loan application. In addition, they anticipated that their future business prospects would be better if they formed a company that could function as a parent company for their current restaurant and any future restaurants they might open.

With this decision made, they began the long and arduous process of setting up their restaurant. As a result, in March $2023,$ they formed Seafood Cuisine, Inc. by contributing $$11,000$ in cash in exchange for the company$$s $1,100$ shares of stock. Sophia convinced her father to loan the new venture $$150,000$ in cash, with principal payable at the rate of $$15,000$ per year over ten years and interest payable at a rate of $5\mathrm{.}5\%$ on the outstanding balance as of the beginning of the loan$$s year. The loan agreement was signed on March $31,2023,$ and provided that both principal and interest would be paid only once a year beginning March $31,2024.$

During March, the girls searched for an appropriate location for the new restaurant. Mackenzie negotiated a lease agreement for approximately $2,000$ square feet of retail space at $$1,200$ monthly. The contract ran for six years, with an option to renew for five more years. The landlord agreed to give the girls two months of free rent on the front end of the lease to help the new business survive the critical start$-$up period. In addition, Sophia arranged to buy a commercial refrigerator, range, and grill for $$30,000$ in cash, delivered and installed on March $31.$ This equipment was expected to last five years $($per the seller$$s assessment$).$

Mackenzie and Sophia also purchased computer hardware with installed restaurant$-$specific software for $$15,000$ cash. The girls plan to depreciate this equipment over six years.

Other cash purchases included:

Food preparation equipment $$1,800$

Restaurant furniture and fixtures $$2,700$

This equipment was expected to have a useful life of three years.

To have the new restaurant fully operational by April $1,$ Mackenzie and Sophia requested that their landlord allow their carpenter, electrician, painters, and plumbers to begin renovations to the leased location on March $30$ and $31.$ The workers completed the necessary renovations and improvements for $$68,000$ in cash. Improvements and renovations would be depreciated over five years.

The purchased kitchen equipment was delivered on March $31,$ and LA$$s Seafood Kitchen opened on April $1,2023.$

First year of operations

Although Mackenzie and Sophia had prepared their business tax return in April $2023($for $2022$ income taxes$),$ they had not prepared a full set of financial statements using the accrual method of accounting. Nevertheless, they kept all the necessary information in a spreadsheet, and Sophia was able to compile these cash flows and relevant accrual information by each income statement account into a columnar form, as follows:

$($look at image$)$

Required

Prepare a Balance Sheet for Seafood Cuisine Inc. as of March $31,2023$

Prepare an Income Statement, Balance Sheet, Statement of Stockholders$$ Equity, Statement of Cash Flows for Seafood Cuisine Inc. as of December $31,2023$

Note: Your financial statements must include proper titles, number formatting, appropriate placement of dollar signs, etc.