ACCOUNTING CYCLE CASE: Noodles & Company
Noodles & Company (NASDAQ:NDLS) operates fast-casual restaurants serving Asian, Mediterranean and American inspired noodle dishes, soups, salads and sandwiches. Specifically, the company earns revenue from food sales at 318 company-owned restaurants and from royalties/fees sales from 62 franchisees throughout the United States. The company is headquartered in Broomfield, Colorado and went public in 2013.
The purpose of this case is to prepare the fiscal year 2013 financial statements for Noodles. Adapted versions of the financial statements for fiscal year 2012 are attached and should be used as a reference. All dollar amounts in this case are in thousands.
- Go to Blackboard and download “NDLS Worksheet.” The T-Accounts tab has pre-made t-accounts. You will not need to create any additional t-accounts to complete this case. Enter the December 31, 2012 balance sheet amounts as the beginning balances in the appropriate t-accounts. Make sure you understand why there are beginning balances in the permanent (balance sheet) accounts but not in the temporary (income statement) accounts.
- The following transactions summarize all activity for the year. Prepare the journal entry for each transaction on the Journal Entries tab of the NDLS Worksheet (the first is done for you). You don’t need to include explanations; just enter the account names and the amount each account is debited or credited. Also post each journal entry to the respective t-accounts.
Notes: Noodles combines several types of non-vendor payables (e.g., taxes payable) under the heading Accrued Expenses. Similarly, the company combines several types of operating expenses (e.g., executive compensation, marketing, utilities) under the heading General and Administrative Expenses. The labor costs for restaurant workers are included in the heading Restaurant Labor on the income statement while the compensation costs for all other employees are included in the heading General and Administrative Expenses.
- Noodles issued new shares of common stock for $100,000.
- Inventory costing $93,068 was purchased, all on account.
- Noodles had sales of $347,140 (all in cash) at the company-owned restaurants. The cost of the food products sold at the company-owned cafes was $91,890.
- The company earned royalties and fees from franchisees of $3,785, all on account.
- Noodles paid down long-term debt in the amount of $110,065 with cash.
- Property and equipment in the amount of $50,420 was purchased. Noodles paid $20,420 in cash and signed a promissory note due in 30 months for $30,000.
- Noodles received $4,515 cash from franchisees as payment for amounts previously owed.
- Noodles paid $108,570 in cash for advertising and administrative costs incurred during the year. In addition, wages for restaurant employees was $104,040 in 2013, all paid in cash.
- Noodles compensated certain high level executives who worked for the company in 2013 by issuing new shares of Noodles stock worth $6,575 (i.e., Noodles gave them shares of the company instead of giving them a paycheck for services provided during the year).
- Noodles paid cash for 2013 pre-opening costs (e.g., site selection, training) of $3,810. In addition, late in the fiscal year, the company paid cash of $1,340 for rental deposits for locations that it did not occupy until 2014.
- The company incurred $2,820 in interest expense for 2013, which was fully paid in cash.
- The company paid $2,775 in cash for shares of its own common stock (i.e., it went to the stock market and bought back shares of its own stock.) This is known as treasury stock. Even though it is part of owners’ equity, treasury stock has a normal debit balance because it reduces the amount of common stock outstanding.
- Noodles paid vendors $94,288 cash owed for previously delivered supplies.
- Noodles recognized depreciation expense of $21,790. For purposes of this case, depreciation expense reduces property and equipment, net. Next week, we will discuss a separate account called accumulated depreciation.
- Noodles reported income tax expense of $4,765 for 2013. Of this amount, the company made estimated cash payments to the IRS during the year of $3,140 and still owed the balance of $1,625 at year end.
- Prepare the trial balance as of December 31, 2013 under the Trial Balance tab using the ending balances in the t-accounts. I have started the trial balance by giving you the correct ending balance in the cash account.
- Prepare the Income Statement, Statement of Retained Earnings and Balance Sheet.
- Prepare the journal entry to close out the revenue and expense accounts to retained earnings. Enter it in the space provided on the Trial Balance tab. You do not need to post the closing entry to the respective t-accounts.
- Submit via Blackboard.