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Accounting 381 ? Summer 2014 Lake Street Wine and Dine




Question;Accounting 381 ? Summer 2014;Lake Street;Wine and Dine;(13 points);In May of 2012, Hayley and Ferdinand Chouinard decided to;open a restaurant and wine bar in McCall, Idaho, a resort town about 90 miles;north of Boise. The Chouinards had been;following the growth in McCall for several years and considered it to be an;area with great potential for their business.;They were especially encouraged by French developer Jean-Pierre Boe?s;plans to build Tamarack Resort, which will be located approximately 15 miles;from McCall. Construction on the $1.5;billion destination ski and golf resort had begun in early 2012. Tamarack plans to target wealthy national and;international vacationers, similar to resorts in Whistler, British;Columbia and Vail, Colorado.;In addition to a full service restaurant and bar, Hayley;and Ferdinand plan to have a small retail area to sell a unique selection of;wines, cheeses and other related items.;They began their search for a location in March and found what they;considered to be an ideal space near the recently renovated Hotel McCall and;walking distance to Payette;Lake.;Pre-Opening Period;Hayley and Ferdinand invested $250,000 of personal funds and;decided to call their new business ?Lake Street Wine and Dine? (hereafter LSWD). On May 15, 2012 they signed a renewable;24-month lease for the location they desired.;The lease required an up front payment for the first six months;(covering July through December 2012) at the rate of $7,000 per month, plus an;additional $15,000 damage deposit that was non-refundable if the lease was;cancelled. While they were allowed to move in on June 1, consider the rental payment;to cover the lease period from July 1 to December 31.;The grand opening was scheduled for July 1st;and the month of June was used to prepare the facility and purchase retail;merchandise and restaurant supplies. The;prior tenant had been a Mexican restaurant, so extensive paint and remodeling;was necessary in order to create the atmosphere they desired. The cost (all paid in cash) of remodeling the;interior space totaled $110,000 and the cost of furnishings was an additional $40,000;including furnishings for the kitchen, bar, and a point of sale computer;system. They expected the useful life of;the leasehold improvements, furnishings and equipment to be 10 years.;In an effort to attract the Tamarack clientele, Hayley and;Ferdinand decided to carry a high-end wine selection along with some northwest;favorites, which would differ from those offered in the restaurant. They placed their initial retail wine order;with a distributor in early June and their first merchandise arrived June 20th;with an invoice for $20,000 payable to the distributor. They also ordered wine that would be served;in the restaurant from the same distributor.;These shipments of consumable items arrived on the same day with an;invoice for $3,500 payable to the distributor.;Lastly, they acquired food and supplies for the kitchen from local food;distributors for cash payments totaling $3,700.;On June 25th Hayley and Ferdinand reviewed the;last minute preparations for opening day as well as where their bank account;stood. Hayley was concerned they had two;outstanding invoices to suppliers totaling $23,500 and that their cash balance;had dwindled down to $39,300. Ferdinand;summarized his concerns. ?In one month;we have gone through $210,700 and that doesn?t count the outstanding invoices;we still owe. We won?t be in business;very long at this rate.?;On June 30th, Hayley and Ferdinand consulted with;Ann Stamey, a local certified public accountant, on setting up accounting;records for LSWD and advice about obtaining additional funding. For example, should they seek other investors;or should they try to get a loan? Ann;explained that, while their bank balance was declining, they were not losing;money, rather they were investing in assets.;Even so, they were right to be concerned with the amount of cash;remaining. After Ann explained the;options of seeking equity versus debt financing, Hayley and Ferdinand decided;to seek a loan as protection against cash shortages.;The First Six;Months of Operations;On July 1st, they obtained a loan for $400,000;from a local bank, payable at the end of two years with semi-annual interest payments;at an annual rate of 10%. Feeling more;comfortable about the company?s cash position, Hayley and Ferdinand proceeded;with their plans for the grand opening of LSWD.;The Grand Opening event was advertised in the local;newspaper and via flyers posted at the other area merchants. The total cost of the advertising for the;grand opening was $1,500, which was paid in cash. As planned, on July 1st the doors;opened to the public and, as an opening promotion, they had free wine tasting;and live music. They estimated the cost;of wine for the free tasting to be $1,000.;Note that they used wine from the food/wine inventory for the tasting. Friends in a band volunteered to play at the;event so no fee was paid for the live music.;Given the amount of foot traffic they had received during the day, the;opening day seemed like a success. A;summary of other events for the first six months of operations follows;?;Retail sales for the first six-month period;ending December 31, 2012 totaled $140,000.;All sales were for cash.;?;Restaurant sales (including food and wine);totaled $125,000 for the first six-month period ending December 31, 2012. All sales were cash sales.;?;Between July 1, 2012 and December 31, 2012, LSWD;took delivery of retail inventories (i.e., inventories other than food and wine;to be served in the restaurant) valued at $42,000. All merchandise was purchased on;account. During the six months, LSWD;made payments to suppliers in the amount of $50,000.;?;Between July 1, 2012 and December 31, 2012, LSWD;took delivery of restaurant food and wine inventory valued at $92,000. All were paid in cash.;?;A one-year insurance policy to cover;miscellaneous liabilities was purchased on September 1, 2012 for $12,000.;?;Payment of $7,000 was made on December 20, 2012;to cover January?s rent.;?;Wages for part-time employees during the;six-month period ended December 31, 2012 totaled $32,000. Of that amount, $3,000 was unpaid at December;31, 2012.;?;Miscellaneous expenses (including Ann Stamey?s;consulting fee) totaling $19,000 were paid in cash.;?;Interest for the first six months was paid;December 31, 2012.;Other information;?;Inventories on hand at December 31, 2012 for;retail merchandise were valued at $15,000 and inventories for restaurant food;and wine were valued at $11,000.;Required (the;following can be done on the attached worksheets, however, I would recommend;completing them in excel.);1. Assume;the events for the pre-opening period ended June 30, 2012 have been recorded;correctly and are reflected in the beginning balances in the T-accounts;worksheet provided. Record the events;for the first six months of operations ended December 31, 2012 in the;T-accounts provided. Note that you will;have to add some new accounts. IGNORE;TAXES.;2. Prepare;the following financial statements;a. Income;statement for the six-month period ended December 31, 2012;b. Balance;sheet at December 31, 2012;3. Does;LSWD have a better profit margin on its sales of retail merchandise or on its;sales of restaurant food and wine?;Note you may use more than or less than the total number;of t-accounts provided.div.eng_slide a > img {width:119px !important,height:102px !important,}div.eng_slide a,div.eng_slide span {width:119px !important,}#git_wrapper_0{width:100%,position:relative,padding-top:20px,overflow:hidden,font-family:inherit,float:left,}.engageya_case31_image{width:148px, height:100%,float:left,position:relative,text-decoration:none !important,}.engageya_case31_text{text-align:left,position:relative,font-style: inherit, font-family:Arial,Helvetica,sans-serif,font-size: 13px, padding:1px,width:148px,height:100%,font-weight:bold,}.like_facebook {float:left,margin-top:5px,min-width:85px,height:20px,background:url("") no-repeat left,border:none,}.like_facebook span {float:right,height:20px,font-size:10px,font-family:Arial,color:black,background:url("") repeat-x,border-right:solid 1px #c1c1c1,border-top: none,border-bottom: none,margin-top: 1px,height: 18px,margin-right: 0px,padding-right: 6px,line-height: 18px,}You May Like.yzmpa_tooltip_box {direction:ltr,text-align:left,display:none,font:12px/20px Arial, Helvetica, sans-serif,width: 121px,box-sizing: border-box,height: 137px,position: absolute,bottom: -114px,right: 20px,background: #ffffff,padding: 8px,color:#494949,font-weight:400,-moz-box-shadow: 0 0 20px 0px #AAA4A4,-webkit-box-shadow: 0 0 20px 0px #AAA4A4,box-shadow: 0 0 20px 0px #AAA4A4,z-index:2,margin-bottom:2px,-moz-border-radius: 4px,-webkit-border-radius: 4px,-khtml-border-radius: 4px,border-radius: 4px,}.yzmpa_tooltip_box:after,.illu_tooltip_box:before {top: 9%,right:-9px,border: solid transparent,content: " ", height: 0,width: 0,position: absolute,pointer-events: none,}.yzmpa_tooltip_box:after {border-color: rgba(255, 255, 255, 0),border-top-color: #ffffff,border-width: 9px,margin-left: -11px,}.yzmpa_tooltip_box:before {border-color: rgba(0, 0, 0, 0),border-top-color: #000000, border-width: 10px, margin-left: -12px,}.yzmpa_tooltip_box label {line-height: 20px,cursor:pointer,display:inline-block,}.yzmpa_tooltip_box label input[type=radio]{float: left,cursor: pointer,margin: 4px 4px 0 2px,}.yzmpa_close_dialog_header{background: #C4C4C4,padding-left: 5px,font-weight: bold,width:100px,margin-bottom:2px,}.yzmpa_close_dialog_btn{position: relative,font-family: serif,top:-15px,font-size: 10px,cursor: pointer,float:right,font-weight:normal,height:0px,}XClose widgetJust for now24 hours72 hours1 monthLifetime She got fired but now makes Rs 300,000/m from homeConsumerTips Unbelievable: Mother makes Rs 300.000/m from home!ConsumerTips Top 10 successful traders everTopTipsNews Ranking of the 10 biggest banks in 2014TopTipsNews 5 tips to get the best mortgage ratesTopTipsNews Looking for a new Job? 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Paper#37489 | Written in 18-Jul-2015

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