impacts to the profit and loss statement 457650

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

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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.