Question

P10.3 You have the following comparative balance sheets for a restaurant for the years ending December 31, 0007, and December 31, 0008. Calcu- late the change in working capital and prepare the restaurant's statement of sources and uses of working capital for the year ending December 31, 0008.

Answer 1

Schedule of Changes in Working Capital
Items	Yr.0007	Yr.0008	Changes in Working Capital
			Increase	Decrease
Current Assets
Cash	$14,800	$15,600	$800
Credit card receivables	$913	$847		$66
Accounts receivables	$7,387	$6,853		$534
Food inventory	$5,925	$7,275	$1,350
Beverage inventory	$1,975	$2,425	$450
	$31,000	$33,000
Current Liabilities
Accounts payables	$4,800	$7,100		$2,300
Accrued expenses payable	$800	$700	$100
Taxes payable	$1,400	$200	$1,200
	$7,000	$8,000
Working Capital	$24,000	$25,000
Net increase in Working Capital	$1,000			$1,000
	$25,000	$25,000	$3,900	$3,900
Computation of Funds from Operations
Net income for year 0008				$7,000
Add: Depreciation				$1,000
Funds from Operations				$8,000
Statement of Sources and Uses of Working Capital
Sources	Amount	Application			Amount
Funds from Operations	$8,000	Increase in Working Capital			$1,000
Issue of new shares	$500	Purchase of Equipment			$4,000
Long Term Loans	$2,500	Dividends paid			$6,000
Total	$11,000	Total			$11,000