Assignment: Impacts to the Profit and Loss Statement

Attached is a copy of Tim’s Coffee Shoppe 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 into his area and explain your rationale 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.  

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This Assignment is not looking for dollar figures, but 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 and when you do make these assumptions, please describe them and their effects 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 

Checklist:

  • If and when 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 of a 4–page paper in APA format and citation style which includes a title page and references page, please respond to the line items above and the two questions provided.

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