Case Study Lone Pine Caf : Balance Sheet

Balance sheet As on Balance sheet As on

2 November 2009 30 March 2010
Assets Assets
S.No Description Amount ($) Remarks S.No Description Amount ($) Remarks
1 Cash in Hand 10,172 Checking Account Balance 1 Cash in Hand 1,030 Checking Account Balance
2 Equipment 53,200 2 Equipment 50,755 Depreciation of 2445 reduced from original
3 Inventory 2,800 Food & Beverages 3 Inventory 2,430 Food & Beverages
4 Licence 1,428 4 Licence 833 5 months consumed out of 12 months
5 Cash Register 1,400 5 Ski Instructors 870 Run up accounts (Receivables)
6 Cash Register and its contents 1,711 1400 Cash Register +311 Cash Balance
69,000 57,629
Liability Liability
S.No Description Amount ($) Remarks S.No Description Amount ($) Remarks
1 Borrowing 21,000 From Bank 1 Borrowing 18,900 Out of 21,000 $ ,2100 $ is repaid
2 Supplier Payment 1,583
21,000 20,483
Capital Capital
S.No Description Amount ($) Remarks S.No Description Amount ($) Remarks
1 Mr. Antoine Capital 16,000 1 Mr. Antoine Capital 12,382
2 Mrs. Antoine Capital 16,000 2 Mrs. Antoine Capital 12,382
3 Mrs. Landers Capital 16,000 3 Mrs. Landers Capital 12,382
48,000 37,146
Assets -(Capital +Liability) 0 Assets -(Capital +Liability) 0
Assumptions:
Answer to third Question: As an answer to the third question, we feel that YES the partners would
have got their proportional values of equity calculated in the question 2, if the partnership was
dissolved on 30th March. This is because, as of 30th March all the companies assets were intact and thus
the value of the assets which was calculated would have been used to pay the liabilities first and the
rest of the money would have been equally distributed among the partners as their share of equity.
Only if the balance sheet would have been made on 31st of March that the stolen items would have
been considered and the respective amounts been deducted from the equity of the partners who took
it.
Lone Pine caf Lone Pine caf
2. There is no mention about the company taking any loan or credit.Thus the difference in the amount
of assets and (liability + owner's equity) is adjusted by subtracting the difference equally from each of
the owner's equity (As the entity is being dissolved, the liabilities will have a stronger claim against the
assets than equity).
3. Personal belongings/Assets of Mr.Antoine & Mrs Landers not considered in balance sheet as they are
not the assets of partnership.
1. The Balance Sheet was to be made as on 30th of March 2010. It is also mentioned that on the
morning of 31st of March, Mrs. Antoine discovered that the Cash Register and the cash it contained, was
missing. Thus we assume that the company had all its assets intact (including the cash register and the
money in it) till 30th of March.
Sub Total
Sub Total
Sub Total
Sub Total
Sub Total
Sub Total
Cash Balance Calculation 2 November 2009
Opening Balance ($)(A)
Description Amount ($)
Parterner's Equity & Borrowing 69,000
(16,000$x3 +21,000 )
Cash Movement ($)(B)
Description Amount ($)
Equipment 53,200
Inventory(Food &Beverages) 2,800
Licence 1,428
Cash Register 1,400
Sub Total 58,828
Closing Balance ($)*
Description Amount ($)
(A)-(B) 10,172
*Deposited in checking account
1
2
Calculation of Owner's Equity for the balance sheet as on 30th March
On 30th of March,
The total assets of the company had a value of $57,629
The total liabilities of the company had a value of $20,243
The initial amounts that three of the partners had put in as equity was $48,000
Thus, if we add the values of liability and the initial owner's equity values, we get a sum of $68,483 which
exceeds the value of assets by $10,854.
We know that in case an entity is dissolved, the Liabilities are a stronger claim against the assets than equity.
Thus the owners have to suffer on their equity amounts for compensating the loss.
In the start of business it was agreed that the partnership would share the profits proportianally as per their
contributed capital. As in this case the partners contributed equal amounts as equity, the loss would also be
shared equally. Thus one third of $10,854 which amounts to $3618 is deducted from $16000 to get the value of
each of the owner's equity, which amounts to $12382.
Calculation of the remaining value of Local Operating License Cost
An amount of $1,428 was paid for local operating licenses and good for one year beginning November 1.
As the business had operate for 5 months as on March 30th 2010, the value of 5 months of operation was
calculated and deducted from $1,428. The remaining amount ($833) was put as an asset.
1428 - (1428 * 5/12) = 833