Assignment: Impacts to the Profit and Loss Statement
Go to Tim’s Coffee Shoppe and look in the back office. Inside the file drawer labeled “Business” is Tim’s Coffee Shoppe’s income statement for the most recent year. This is the most recent record Tim has. This year, several large businesses are moving in around his coffee shop and he expects business to increase. Tim needs to create a pro forma profit and loss (income) statement for this year, and you need to help him.
In this assignment, discuss whether each area in the pro forma income statement will increase, decrease, or stay the same due to large businesses moving into the neighboring buildings and explain your rationale for why that line item will increase, decrease, or stay the same. Remember, Tim serves coffee to many people who work in the area, so he would certainly expect a major increase in his business volume.
This assignment is not looking for dollar figures, but primarily your justification for why the line items will change and what direction they will change, if any. You may make assumptions based on the increased sales volume and how it will affect income and expenses; if and when you do make these assumptions, please describe them and their effects on each line item.
Review the tutorials provided in the learning activity and search the Internet for videos about financial statements for assistance.
These are the line items:
Lease (on a refrigerator)
Interest (on loans currently held)
- If you made assumptions based on the increased sales volume and how it will affect income and expenses, please describe them and their effects on each line item.
- Given what you have assumed and projected, will the total expenses increase or decrease? Why?
- Given what you have assumed and projected, will the net profit increase or decrease? Why?
In a minimum 4-page paper (which includes the title and reference pages) in current APA format and citation style, please respond to the line items above and the questions provided.