Charlie Brown feels very depressed. He has been in business, on his own, for just one month, running the Eat-A-Bite Cafe. His father purchased a piece of land alongside the main road into town for £95,000, on a 19-year lease, and has spent an additional £19,000 on constructing the pop-up cafe. In return, his father wants the satisfaction of knowing that his son is set up in life. Charlie was pleased with his choice when he appointed Boo Boo as a chef and Nala and Saksoora as waitresses. 

The business has been great from the start, but now he and his father have prepared a set of accounts for the first month’s operations and it looks as though the cafe is operating at a loss. Neither of the men knows much about accounting, and they have prepared the statements set out below using an old bookkeeping textbook, which they found online. What is upsetting Charlie, even more, is that he is hoping to get married at the end of the year, but has agreed with his fiancée that this will not be possible if the business is struggling. He also knows that his father has given up a 10% return on investments he cashed in to provide funds for the business, and this very morning the bank manager has asked him to go to the bank to discuss his overdraft. He has decided to talk things over with his future father-in-law, with a view to possibly taking a job with his company as a truck driver where he knows he can earn £400 per week, plus overtime. Before this, however, he has come to discuss his problems with you and brought with him the attached financial information. 

Required: 

1. Prepare a revised set of financial statements in good form. 

2. With reference to 1 above and any relevant further calculations, give your recommendations to Charlie.

 

Transcribed Image Text:

Income Sales Expenses Purchases Net Loss THE 'EAT-A-BITE' Cafe Income and Expense Summary for the month ended August 31 Chef's salary Wait staff wages Social Security, Insurance, etc Stationary, printing and advertising Postage and telephone Electricity Assets Food Drink Gas Other expenses Cash withdrawn by Charlie Liabilities Food Drink Cleaning Materials Kitchen Utensils and Appliances Linen, cutlery, china and glass 'tableware' Cash Stock of food Stock of drinks Cleaning materials Tableware (expected to last 2 years) Kitchen utensils (they will also last 2 years) Menus and brochures Bank Overdraft Food and Drink bills due (included in 25,260 above) $ 15,260 10,000 445 1,200 1,800 1,800 1,400 320 175 100 171 108 32 2,600 14,206 9,020 23,226 35,411 ($12,185) 150 6,080 6,500 225 1,800 1,200 145 $16,100 3,500 8,835 $12,335 Income Sales Expenses Purchases Net Loss THE 'EAT-A-BITE' Cafe Income and Expense Summary for the month ended August 31 Chef's salary Wait staff wages Social Security, Insurance, etc Stationary, printing and advertising Postage and telephone Electricity Assets Food Drink Gas Other expenses Cash withdrawn by Charlie Liabilities Food Drink Cleaning Materials Kitchen Utensils and Appliances Linen, cutlery, china and glass 'tableware' Cash Stock of food Stock of drinks Cleaning materials Tableware (expected to last 2 years) Kitchen utensils (they will also last 2 years) Menus and brochures Bank Overdraft Food and Drink bills due (included in 25,260 above) $ 15,260 10,000 445 1,200 1,800 1,800 1,400 320 175 100 171 108 32 2,600 14,206 9,020 23,226 35,411 ($12,185) 150 6,080 6,500 225 1,800 1,200 145 $16,100 3,500 8,835 $12,335

Answer rating: 100% (QA)

To help Charlie Brown understand his cafes financial situation and provide recommendations lets first prepare a revised set of financial statements Well start with the Income Statement then the Balanc... View the full answer