1. Consider the following financial information for the year ended December 31, 2015 for Henry’s Lobster Shack, a thriving restaurant in Jaco, Costa Rica.

 

Accounts Payable

$   166,000

Dividends paid during 2015

$   39,000

Wages and Taxes payable

    120,000

Other Liabilities

   517,000

Cash balance, Jan. 1/15

     84,000

Other Revenues

    21,000

Cash balance, Dec. 31/15

     94,000

Property and Equipment

 1,549,000

Food and Supplies Expense

  1,415,000

Restaurant Sales Revenue

 3,920,000

Selling and Admin Expenses

    235,000

Utilities and Other Expenses

 1,104,000

Food and Supply Inventory

     87,000

Wages Expense

 1,087,000

Notes Payable

    235,000

Retained Earnings, Jan 1/15

 1,074,000

Other Assets

    529,000

Henry’s Contributed Capital

    86,000

Prepare a set of financial statements for Henry’s Lobster Shack excluding a Statement of Cash Flow. (13 marks)

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Answer


Veronica

The set of financial statements include the income statement, balance sheet, statement of retained earnings and the cash flow statement.

Balance sheet: This statement provides details of available assets and owed liabilities from investing and financial activities of the business. This statement reveals the financial health of company. So, this statement is also called as Statement of Financial Position. The users could estimate whether the company has enough assets to pay off its liabilities. The main components of balance sheet are assets, liabilities, and stockholders' equity.

Income statement: Income statement is prepared to find out the net operating income during the period.

Statement of retained earnings: The statement of retained earnings is a statement which specifies the amount of retained earnings during a particular period of time. the amount of ending retained earnings is computed by adding the net income to opening retained earnings and subtracting dividend paid. 

The set of financial statement excluding cash flow statement for Henry’s Lobster Shack is as follows:

The income statement is as follows:

Henry’s Lobster Shack

Income Statement

for the year ended December 31, 2015

Revenues

 $          21,000

Restaurant Sales Revenue

 $     3,920,000

Total revenues

 $     3,941,000

Expenditure

 $     1,415,000

Selling and administrative expenses

 $        235,000

Utilities and Other Expenses

 $     1,104,000

Wages Expense

 $     1,087,000

Total expenditure

 $     3,841,000

 

 

Net income

 $        100,000 (1)

The balance sheet is as follows:

Henry’s Lobster Shack

Balance Sheet

as on December 31, 2015

Assets:

 

Cash

 $          94,000

Food and Supply Inventory

 $          87,000

Property and Equipment

 $     1,549,000

Other Assets

 $        529,000

Total assets

 $     2,259,000

 

 

Liabilities:

 

Accounts Payable

 $        166,000

Wages and Taxes payable

 $        120,000

Notes Payable

 $        235,000

Other Liabilities

 $        517,000

Total Liabilities

 $     1,038,000

Shareholder's equity

 

Contributed capital

 $          86,000

Retained Earnings on December 31, 2015

 $     1,135,000 (2)

Total Liabilities and Equity

 $     2,259,000

The statement of retained earnings is as follows:

Henry’s Lobster Shack

Statement of Retained Earnings

for the year ended December 31, 2015

 

 

Retained Earnings, Jan 1/15

 $     1,074,000

Add: Net income

 $        100,000 (1)

New retained earnings

 $     1,174,000

less Dividend

 $          39,000

Retained Earnings on December 31, 2015

 $     1,135,000 (2)



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