Impacts to the Profit and Loss Statement

    Below is Tim’s Coffee Shop Income Statement for the year for 2008. 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.

    Income Earned…………………………. $400,527

    Expenses:

    Salaries Expenses………………………..$101,600

    Rent Expense…………………………….$14,400

    Depreciation Expense……………………$12,116

    Supplies Expense…………………………$135,827

    Lease Expense……………………………$11,987

    Tax Expense…………………………….. $40,515

    Interest Expense………………………… $615

    Insurance Expense………………………..$8,956

    Total Expenses ——————————–$326,016

    Net Income ————————————$74,511

    ====================================================================

    I need to know if in each area in the pro forma income statement will increase, decrease or stay the same due to large businesses moving into the neighboring
    buildings into his area and explain the rationale why that line item will increase, decrease or stay the same. Tim serves coffee to many people who work in the
    area, so he would certainly expect a major increase in his business volume.

    This is not looking for dollar figures, primarily your justification on 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/when you do make these assumptions, please describe them and their
    affects on each line item. These are the line items:

    Income Earned

    Expenses include:

    Salaries

    Rent

    Depreciation

    Supplies

    Lease (on your refrigerator)

    Tax

    Interest (on loans currently held)

    Insurance

    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?

    All your help on this will truly be appreciated and valued, as I truly am struggling to understand Accounting.

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