MEMORANDUM
TO: Brian Huels
FROM: Jessica Stahl
DATE: September 11, 2019
RE: Big Lou’s Standing Room Only – Account List
Based upon a recent visit to Big Lou’s Standing Room Only, a preliminary list of accounts that would be used for accounting purposes is included below.
Asset Accounts
Cash
Accounts Receivable
Equipment
Building/ Land
Inventory
Automobiles
Prepaid Insurance
Liability Accounts
Accounts Payable
Credit Card Payable
Revenue Accounts
Food Sales
Catering
Expense Accounts
Wages
Utilities
Telephone
Insurance
Advertising
Inventory
Maintenance
Automobiles
Thank you for your review of the accounts listed above. If you have any questions, I can be reached via email at XXXXXXXXXX.
ACCOUNT 701: Restaurant Project – Part 2 (Due Week 5)
This is the second part of the two-part restaurant project assignment. Your work for this phase of the
project should build on your submission from part one plus any feedback received. For the second part
of the assignment the goal is to prepare financial statements for your selected restaurant.
Complete the following steps:
1. Refer to your Part 1 assignment. Review any feedback that you might have received and think
about any additional accounts that might need to exist within the respective account categories.
The minimum number of accounts for your restaurant should be as follows: Assets (8),
Liabilities (4), Revenue (2), and Expenses XXXXXXXXXXDepending on your submission for Part 1 add to
your accounts as needed to hit these minimums. Also, refer to the “Business Highlights”
section on the second page of this document for detail on certain items that need to be present
in Part 2 of the Restaurant Project.
2. Create a multi-step income statement for the year ended December 31, 2018. You will need
estimate numbers for total revenues and expenses related to the calendar year ended
December 31, 2018. The majority of your revenue and expense accounts will be derived from
your Part 1 assignment. For Part 2, this assignment, the goal is to assign/estimate numbers to
each account. Be as realistic as possible in your number selection. The only requirement is that
your restaurant remain profitable for the year. I suggest that you try and put yourself in the
mindset of the restaurant as to what the actual performance would/could be.
3. Create a statement of equity for your restaurant. The statement should represent the time
period of the year ending December 31, XXXXXXXXXXIn preparation of this statement make sure that
you reflect the restaurant owners taking a dividend equal to 20% of the 2018 net income. The
etained earnings ca
ied over from the previous year XXXXXXXXXXshould be equal to $200,000.
4. Create a classified balance sheet for the restaurant. The last account that you populate will
most likely involve a “plug” to keep your balance sheet in balance. Remember, the balance
sheet must balance. All numbers (on all statements) should be reviewed for believability.
5. Review the prepared financials and come up with an answer for each of the questions shown
elow (a, b, and c). When uploading to Canvas include the answers to your questions in the
submission window comment box.
a. What is one positive thing that you would want to highlight?
. What is one negative thing you would want to highlight?
c. What is one recommendation that you have for this restaurant based on review of the
financials?
NOTE: These questions should be pretty simple since you created all the numbers in the financials.
Business Highlights / Items
A. The business is a corporation. You can make any assumptions that you feel are necessary about
par value, amount paid by investors to acquire stock, as well as the number of shares of stock
authorized, issued, and/or outstanding.
B. You provide paid vacation to your employees. They earn the vacation in the cu
ent year and
are allowed to take the vacation in subsequent periods.
C. Early in the life of the business, it was decided to change the name of the business to the
cu
ent name. This was done by purchasing the rights to the name from another restaurant that
had listed the name of the business for sale on eBay. The name (which was trademarked) cost
the owners $10,000 of which it had (and continues to have) an indefinite life.
D. Although the business does the best it can to collect from catering customers, it is not always
successful. Each year accounts are deemed uncollectable and written off. They use an
allowance method for dealing with bad debts.
E. The restaurant must own at least one type of long-term asset (e.g. property, plant, and
equipment). Make sure you have included depreciation in your financials. The numbers used
should properly reflect the cu
ent age and estimated useful life of the assets.
F. Employees are paid on the 1st of every month for the work that they performed in the preceding
month.
G. To attract employees, the restaurant offers a retirement plan (defined benefit) for all
employees. Although unlikely in the real-world, the restaurant is the holder of the funds that
will be used in the future to payout this retirement plan. The restaurant funds 100% of the cost
of the plan at a rate of 2% of employee wages (excluding owner wages).
H. To provide certainty that business insurance will not expire the restaurant pays in advance
insurance for the subsequent month of business.
I. The restaurant charges sales tax on all food and beverage sales (5% rate). Sales tax is collected
from restaurant patrons but is due to the state government. The amount collected from
customers is paid on the 20th of the month following the monthly period of sale.
J. The restaurant is responsible for payroll taxes equal to 10% of the wages of all employees.
Submission: Upload the completed Excel file that contains the financials to Canvas. In addition, be sure
to post your positive, negative, and recommendation for improvement within the Canvas submission
window. Related to the Excel file, I recommend placing each financial on its own tab within the
workbook (and linking between). You are not preparing a grid for this assignment. You are simply
estimating the numbers for a one year period. As an example, if you think catering revenue for the year
would be $100,000. Your income statement will show the $100,000. NOTE: This assignment should go
pretty quick. I recommend using a template that you have previously created and adjusting it to fit your
estaurant.
Scoring: 35 Points Total (30 for Accuracy, 5 for Appearance and Timeliness)