Question

The Mysterious Case of the Loaded Leprechaun

The Loaded Leprechaun (hereafter, the Leprechaun) is a popular chain of Irish-themed restaurants with locations in tourist hotspots across the United States, including Boston, Chicago, Las Vegas and New York. The bills itself as “America’s Greatest Brew Pub” and specializes in excellent steaks and six varieties of beer that are brewed in-house at each location.

The Leprechaun has been owned and operated as a private company since its founding in 1948 by the O’Shaughnessy family (for the purpose of the study, assume the company applies IFRS). One of the great traditions at the Leprechaun is the “Dollar Holler.” Patrons (i.e., customers) personalize dollar bills by writing a message or drawing a picture with a permanent marker and then staple the dollar to the ceiling, wall, banister, or any other available surface in the restaurant. As each dollar goes up, the employees let out an appreciative yell. Patrons supply the dollar bills themselves, although the wait staff will make change for customers who need dollar bills. Each customer is allowed to place as many dollar bills as they like on the walls, and most place at least one dollar bill on the wall per visit.

Over the years, this tradition has grown in popularity, and the O’Shaughnessy family estimates that the average restaurant has accumulated more than $1 million in personalized dollar bills. The dollars are not regularly counted, and the wait staff does not participate in any accounting for dollar bills, other than by asking the customers not to remove existing dollar bills, a problem that the company frequently encounters.

Discuss the financial reporting issues focusing on:
(1) How should the management account for these “Dollar Holler” dollars? (What are the journal entries?)
(2) How should the company account for the theft of “Dollar Holler” dollars?
(3) How should the company report the “Dollar Holler” dollars in the financial statements?

Answer 1

Answers : -

Initial recording of the 'dollar holler' dollar is that the fact that dollars of the 'dollar holler' have not been recorded has the implications on the accounting equation. The loaded Leprechaun has understand their assets. On account of earning the dollars they should be recognised as a revenue for the company which affects the stakeholders equity in the accounting equation. Revenue is defined as income that a company receives from its normal business activities usually from the sale of the goods and services from the customers.

The theft of the dollar holler will be accounted after company account for the total of the dollar holler. If not the company cannot account for dollars holler as there will be no specification of the income or revenues.

The company should report the dollar holler as the revenue, as the dollar holler is the revenue of the company which is stick on the walls of the restaurants for delivering such goods services to the customers.