Solution for Lone Pine Cafe Case

SOLUTION FOR LONE PINE CAFE CASE:

 A)Each of the partners contributed $16000 cash to the partnership and agreed to share in their profits proportionally to what they had invested which amounts to 1/3rd of the total profit.  Therefore, each Owner’s equity : $16000 cash  They signed a one year lease at a nearby cafe called the Lone pine cafe and agreed to pay a rent of $ 1500 every month.  The partners borrowed $21000 from the bank . They used $35000 out of their partnership money and loan from the bank to buy equipments worth $53200 plus $ 2800 for Inventory ( food and beverages).   Also they paid additionally $1428 for local operating license and $ 1400 for a new cash register.  Thus the money remaining from their partnership account is : o $48000- $( 35000+1428+1400)= $ 10172

Lone Pine Cafe Statement of Financial Position As of Nov 2nd, 2009 Assets

Liabilities

Cash Inventory Prepaid license expense

10172 2800

Total current assets

14400

Payable to Bank

21000

Total liability

21000

Owner's Equity: Mr. Antoine'sEquity

16000

1428

Non current assets: Property, plant and equipment

53200

Cash register Total

1400 54600

Mrs. Antoine's Equity Mrs. Sandra Lander's Equity Total Equity

69000

Total liabilities and owner's Equity

Total Assets:

16000 16000 48000 69000

 B) On March 31st , 2010, Mrs Antoine discovered that Mr Antoine and Mrs landers were missing.  She considered the partnership to be dissolved and thus brought in an accountant to resolve the matter.  Mr Antoine and Mrs landers had taken away the cash register plus $311 cash in it.

 Thus total equipment cost = $( 54600-1400) • = $ 53200  Thus total loss= cost of cash register + cash in it = $( 1400 + 311) = $ 1711 There fore,  Mr Antoine withdrawals= $ 1711/2= 855.50 Mrs landers withdrawals= $ 1711/2= 855.50  Checking account balance= $1030 Ski instructor’s payment= $ 870 Total cash = $ 1900  Mr Simpson ( The accountant ) calculated the depreciation on the equipment to be $ 2445.  Net cost of equipment= $( 53200-2455)= $ 50755  Lone Pine café owed suppliers = $ 1583  Food and beverages on hand were estimated to be about $2430. Inventory = $ 2430  The partnership had repaid $2100 of the loan from Bank.  Thus loan remaining: $( 21000-2100)= $ 18900  The prepaid local operating expense had been used for 5 months. Thus this should be subtracted from the remaining amount. 1428/12= $ 119 per month For 5 months: $ 119* 5 = $ 595

 Amount remaining: $ ( 1428-595) = $ 833  During the period of the operations, the partners withdrew agreed upon salaries and these payments were upto date.  Mr Antoine left behind his clothes which were estimated to be about $750.  Mr Simpson thus prepared a balance sheet as of March 30 th 2010. He listed the items they owned as of Mar 30 th, listed the items they owed and the balance was divided among the three equally as equity. Lone Pine Cafe Statement of Financial Position As of Mar 30th, 2010

Assets

Liabilities

Cash Inventory Prepaid expense

1900 2430 833

Payable to Bank Loan from local suppliers

18900 1583

Total Current assets

5163

Total Liability

20483

Non current assets:

Owner's Equity Mr Antonie's Equity 53200 Mrs. Antoine's Equity

12382 12382

Total

-2445 Mrs. Lander's equity Mr Antonie's withdrawal Mrs landers's withdrawal 50755 Total Equity

12382 -855 -855 35435

Total Assets:

Total Liabilities and Owner's 55918 Equity:

55918

Equipment Less: Accumulated depreciation

 c) We see from the balance sheets that their partnership would

not have been able to receive their proportional share of equity disregarding the marital complications.