Dimitri Chekhov owns a medium-sized Russian restaurant called The Steppes. Most of his business is from customers who enjoy in-restaurant lunches and dinners and pay before they leave. He also provides catered food for functions outside of the restaurant. Because he needs to prepare the food in large quantities and transport it to the venue, he requires these customers to make a 40% deposit at the time of booking the event. The remaining 60% is due on the day of the function.
During 2016, the restaurant took in $736,432 from restaurant and catered sales. At year end, December 31, 2016, the catered sales amount included $12,678 for a convention scheduled for January 12, 2017. Dimitri paid $198,108 for food supplies during the year and $248,572 for wages for the chefs and other restaurant staff. The restaurant owed $6,161 in wages to its staff at year end, which will be paid on January 4, 2017, as part of the normal weekly pay schedule.
Required:
Prepare as much of the statement of income for The Steppes as you can, showing the amount of sales and any other amounts that should be included. Show all calculations. Using the revenue recognition criteria, justify the revenue recognition method you selected. Do you have a cost of goods sold? Why or why not? What other expenses do you think the restaurant probably has?