Lone Pine Cafe Case Balance Sheet

On March 21, 2006, the partnership that had been organized to operate the Lone Pine
Caf was dissolved under unusual circumstance, and in connection with its dissolution,
preparation of a balance sheet became necessary.
The partnership was formed by Mr. and Mrs. Hendry Antoine and Mrs. Sandra Landers,
who had become acquainted while working in a Portland, Oregon, restaurant. On
November 1, 2005, each of the three partners contributed $16,000 cash to the
partnership and agreed to share in the profits proportionally to their contributed capital
(i.e., one-third each). The Antoines contribution represented practically all of their
savings. Mrs. Landers payment was the proceeds of her late husbands insurance policy.
On that day also the partnership signed a one-year lease to the Lone Pine Caf, located
in a nearby recreational area. The monthly rent on the caf was $1,500. This facility
attracted the partners in part because there were living accommodations on the floor
above the restaurant. One room was occupied by the Antoines and another by Mrs.
Landers.
The partners borrowed $21,000 from a local bank and used this plus $35,000 of
partnership funds to buy out the previous operator of the caf. Of this amount, $53,200
was for equipment and $2,800 was for the food and beverages then on hand. The
partnership paid $1,428 for local operating licenses, good for one year beginning
November 1, and paid $1,400 for a new cash register. The remainder of the $69,000 was
deposited in a checking account.
Shortly after November 1, the partners opened the restaurant. Mr. Antoine was the cook,
and Mrs. Antoine and Mrs. Landers waited on customers. Mrs. Antoine also ordered the
food, beverages, and a supply, operated the cash register, and was responsible for the
checking account.
The restaurant operated throughout the winter season on 2005-2006. It was not very
successful. On the morning of March 31, 2006, Mrs. Antoine discovered the MR.
Antoine and Mrs. Landers had disappeared. Mrs. Landers had taken all her possessions,
but Mr. Antoine had left behind most of his clothing, presumably because he could not
remove it without warning Mrs. Antoine. The new cash register and its contents were
also missing. No other partnership assets were missing. Mrs. Antoine concluded that the
partnership was dissolved. (The court subsequently affirmed that the partnership was
dissolved as of March 30).
Mrs. Antoine decided to continue operating the Lone Pine Caf. She realized that an
accounting would have to be made as of March 30 and called in Donald Simpson, an
acquaintance who was knowledgeable about accounting.
In response to Mr. Simpsons questions, Mrs. Antoine said that the cash register had
contained $311 and the checking account balance was $1030. Ski instructors who were
permitted to charge their meals had run-up accounts totaling $870. (These accounts
were subsequently paid in full). The Lone Pine Caf owed suppliers amounts totaling
$1,583. Mr. Simpson estimated that deprecation on the assts amounted to $2,445. Food
and beverages on hand were estimated to be worth $2,430. During the period of its
operation, the partners drew salaries at agreed-upon amounts, and these payments were
up to date. The clothing that MR. Antoine left behind was estimated to work $7095. The
partnership had also repaid $2,100 of the bank loan.
Mr. Simpson explained that in order to account for the partners equity, he would
prepare a balance sheet. He would list the items that the partnership owned as of March
30, subtract the amounts that are owned to outside parties, and the balance would be
the equity of the three partners. Each partner would be entitled to one-third of this
amount.
Required:
1. Prepare a balance sheet for the Lone Pine Caf as of November 2, 2005.
2. Prepare a balance sheet as of March 30, 2006.
3. Disregarding the martial complications, do you suppose that the partners would
have been able to receive their proportional share of the equity determined in
Question 2 if the partnership was dissolved on March 30, 2006? Why?

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On March 21, 2006, the partnership that had been organized to operate the Lone Pine

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