THE CASE OF LONE PINE CAF

Ryan Chu Michelle Saquido Vanessa Pabuhat John Patrick Perez

Ryan Chu Michelle Saquido John Patrick Perez Vanessa Pabuhat

PART 1:
THE STORY
OBJECTIVES

CASE ANALYSIS

BY: Ryan Chu and Michelle Saquido

I. THE STORY
Mr.

and Mrs. Henry Antoine and Mrs. Sandra Landers formed a partnership. Nov 1, 2009 they contributed cash and agreed to share in the profits proportionally to their contribution. The Antoines contributed all of their savings, while Mrs. Landers from the proceeds of her late husbands insurance policy.

I. THE STORY
They

opened the restaurant shortly after, in the winter of 2009-2010. But it was not successful. Mar 31, 2010 Mrs. Antoine discovered that Mr. Antoine and Mrs. Landers had disappeared. Mr. Antoine left some of his clothes and Mrs. Landers took all her possessions. The cash register and its contents were also missing.

I. THE STORY
Mrs.

Antoine concluded that the partnership was dissolved and the court subsequently affirmed of its dissolution. Mrs. Antoine decides to continue operating the cafe. She realized that an accounting would have to be made at the end of March 2010. Mrs. Antoine asked Mr. Donald Simpson, a friend, to assist her with the accounting.

II. OBJECTIVES
To

prepare a balance sheet for Lone Pine Cafe as of November 2, 2009. To prepare a balance sheet for Lone Pine Cafe as of March 30, 2010. To determine if the partners would have been able to receive their proportional share of the equity if the company is dissolved in March 30, 2010. Why?

III. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

Prepare a Balance Sheet for Lone Pine Cafe as of November 2, 2009.

Lone Pine Caf Statement of Financial Position As of November 2, 2009

Assets Current Assets Cash Inventory Prepaid Expense Total Current Assets: Property, Plant and Equipment Equipment

Liabilities Notes Payable 10172 2800 1428

21000

14400

Owners Equity Mr. Antoine, Capital Mrs. Antoine, Capital Mrs. Landers, Capital
Total Liabilities and Owners Equity

16000 16000 16000

54600

Total Assets:

69000

69000

III. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

Nov 1: Each of the three partners contributed 16000 cash to the partnership and agreed to share in the profits proportionally to their contributed capital. Cash 48000 Mr. Antoine, Capital Mrs. Antoine, Capital Mrs. Landers, Capital

16000 16000 16000

III. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

Nov 1: The partnership signed a one-year lease to the Lone Pine Cafe, located in a nearby recreational area. The monthly rent on the cafe was 1500.

III. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

The partners borrowed 21000 from a local bank and used this plus 35000 of partnership funds to buy out the previous operator of the cafe. Of this amount 53200 was for equipment and 2800 was for the food and beverages then on hand. Cash 21000 Notes Payable 21000

Equipment Inventory Cash

53200 2800
56000

III. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

The partnership paid 1428 for local operating expense, good for one year beginning November 1. Prepaid Expense Cash 1428 1428

III. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

The

partnership paid 1400 for a new cash register. Equipment Cash 1400

1400

IV. CASE ANALYSIS (A. BALANCE SHEET AS OF NOV 2, 2009)

Prepare a Balance Sheet for Lone Pine Cafe as of November 2, 2009.

Lone Pine Caf Statement of Financial Position As of November 2, 2009

Assets Current Assets Cash Inventory Prepaid Expense Total Current Assets: Property, Plant and Equipment Equipment

Liabilities Notes Payable 10172 2800 1428

21000

14400

Owners Equity Mr. Antoine, Capital Mrs. Antoine, Capital Mrs. Landers, Capital
Total Liabilities and Owners Equity

16000 16000 16000

54600

Total Assets:

69000

69000

PART 2: CASE ANALYSIS B, C SUMMARY

BY: Vanessa Pabuhat and John Patrick Perez

IV. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

Prepare a Balance Sheet for Lone Pine Cafe as of March 30, 2010.
Lone Pine Caf Statement of Financial Position As of March 30, 2010 Assets Current Assets Cash Inventory Prepaid Expense Total Current Assets: Non Current Assets Equipment Less: Accumulated Depreciation Liabilities Accounts Payable Notes Payable Total Liabilities 5163 Owners Equity Mr. Antoine, Capital Mrs. Antoine, Capital Mrs. Landers, Capital Mr. Antoine, Withdrawal Mrs. Landers, Withdrawal Total Liabilities and Owners Equity 1583 18900 20483

1900 2430 833

53200 (2445) 50755

12382 12382 12382 (855.50) (855.50) 35435 55918

Total Assets:

55918

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

The

new cash register and its contents were also missing. Along with Mr. Antoine and Mrs. Landers. The cash register had contained 311. Equipment = 54600 1400 Equipment = 53200 Total loss = 1400 cash register + 311 cash Mr. Antoine, Withdrawals = 855.50 Mrs. Landers, Withdrawals = 855.50

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

The

checking account balance was 1030. Ski instructors who were allowed to charge their meals had run up accounts totaling to 870. These accounts subsequently were paid in full. Cash = 1030 + 870 Cash = 1900

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

The

Lone Pine cafe owed suppliers amounts totaling 1583. Accounts Payable = 1583

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

Mr.

Simpson estimated that depreciation on assets amounted to 2445. Equipment Less: Accumulated Depreciation Book Value: 53200 (2445) 50755

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

Food

and beverages on hand were estimated to be worth 2430. Inventory = 2430

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

During

the period of its operations, the partners drew salaries at agreed upon amounts, and these payments were up to date. The clothing that Mr. Antoine left behind was estimated to be worth 750.

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

The

partnership had also repaid 2100 of the bank loan. Notes Payable = 21000 - 2100 Notes Payable = 18900

III. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

Prepaid Expense. The local operating expense has been used up for 5 months. Thus, an amount of $595 must be subtracted to the Prepaid Expense account. Prepaid Expense = 1428 (119 x 5 months) Prepaid Expense = 1428 595 Prepaid Expense = 833

IV. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

Mr. Simpson explained that in order to account for partner's equity, he would prepare a balance sheet. He would list the items that the partner owned as of March 30, 2010, subtract the amounts that it owed to outside parties, and the balance would be the equity of the three partners. Each partner would be entitled to one third of this amount.

IV. CASE ANALYSIS (B. BALANCE SHEET AS OF MARCH 30, 2010)

Prepare a Balance Sheet for Lone Pine Cafe as of March 30, 2010.
Lone Pine Caf Statement of Financial Position As of March 30, 2010 Assets Current Assets Cash Inventory Prepaid Expense Total Current Assets: Non Current Assets Equipment Less: Accumulated Depreciation Liabilities Accounts Payable Notes Payable Total Liabilities 5163 Owners Equity Mr. Antoine, Capital Mrs. Antoine, Capital Mrs. Landers, Capital Mr. Antoine, Withdrawal Mrs. Landers, Withdrawal Total Liabilities and Owners Equity 1583 18900 20483

1900 2430 833

53200 (2445) 50755

12382 12382 12382 (855.50) (855.50) 35435 55918

Total Assets:

55918

III. CASE ANALYSIS (C)

Disregarding the marital complications, do you suppose that the partners would have been able to receive the proportional share of the equity determined in Question 2 if the partnership was dissolved on March 30, 2010? Why?

IV. SUMMARY
On March 31, 2010, the partnership that have been organized to operate the Lone Pine Cafe was dissolved under unusual circumstances, and in connection to its dissolution, a balance sheet became necessary. We prepared a balance sheet as of November 1, 2009 having the three partners invested equally in agreement of equal shares in the equity.

IV. SUMMARY
At the time the partners also signed a one-year lease to Lone Pine Cafe, bought equipment and supplies inventory from their investments and bank loans. Shortly after starting the restaurant, they found that the business was not going well. We also prepared a balance sheet as of March 30, 2010 after Mrs. Antoine found out that her husband and Mrs. Landers went missing along with the partnership's cash register and its contents. The partnership was dissolved.

IV. SUMMARY

We found in the balance sheet that:

The partnership would not have been able to receive their proportional shares of the equity.

V. QUESTIONS