1959 Liquor Dispensary
BROEKER g HENDRICKSON
Certified Public Accountants
PILLSBURY BUILDING. MINNEAPOLIS 2, MINNESOTA
TELEPHONE FEDERAL 9-0674
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VILLAGE OF NEW HOPE
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~R_ DISPEl~~Y .. FUND
DETERl'1INATION OF :N""ET RE,\TEl'flJE
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FOR THE PERIOD FROM DECEMBER 13~ - 1958 TO DECEr-ffiER 31~ .l:.92~
AS DEFINED IN SECTION 2.2 OF
THE RESOLUTION AUTHORIZING ISSUANCE OF REVENUE BONDS
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Net loss for the period ended December 31, 1958
(as adjusted) $ ~4~699.05
Net loss for the year ended December 31, 1959 ~~2.J525 .01,
$ (8~304.06
Add back-
Expenses incurred and accrued which are not
deductions from gross revenue in determination
of net revenue:
Depreciation expense for the year ended
December 31, 1959 (depreciation for the
19 days in 1958 was not recorded) $ 2,618.40
Interest expense for the period from
August 1,-1958 (date of-bond issue) 7,421.92
to December 31, 1959
Net income from operations, before
deduction of interest and depreciation,
for the period from December 13, 1958
to December 31, 1959 $ 1,736.26
Deduct- Net revenue reserves:
Allowance for a reasonable stock of inventory
(reflected by inventory balances-at
December 31, 1959) $12,164.49
Allowance for a reasonable reserve for
operation and maintenance emergencies
(reflected as approximately one monthis
operating expenses) ...~-' 400 .00 14, 564..~~.
Net revenue (as defined~ for the period
from December 13, 195 to December 31,
1959 (deficit) $(12,828.23
BROEKER & HENDRICKSON
Certz/ied Public Accountants
PILLSBURY BUILDING' MINNEAPOLI S 2, MINNESOTA
February 19, 1960
To the Village Council
Village of New Hope
Hennepin County, lViinnesota
We have examined the balance sheet of the VILLAGE OF NEW HOPE,
LIQUOR DISPENSARY FUND as of December 31, 1959, and the related statement
of income and surplus for the year then ended. Our examination was made
in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing
procedures as we considered necessaFJ in the circumstances.
In our opinion, the accompanying balance sheet and statement of
income and surplus present fairly the financial position of the Village
of New Hope, Liquor Dispensary Fund at December 31, 1959, and the results
of its operations for the year then ended, in conformity with generally
accepted accounting principles.
The following pages of this report set forth certain comments
relative to the liquor dispensary fund's organization, financial position
and operations and to the scope of our examination. For simplicity the
amounts included in the text of the report are expressed in even hundreds
of dollars.
We are submitting under separate cover a letter setting forth
our recommendations in regard to certain matters noted in connection with
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our examlna~lon.
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COf.~lliNTS ON ORGANIZATION
The Village of New Hope by Ordinance No. 58-11, adopted June 24,
1958, operates a municipal on and off-sale liquor dispensary at 7180 Forty-
Second Avenue North. The operations of the liquor store commenced on
December 13, 1958. Construction of the building and purchase of equipment
and fixtures were financed by the proceeds of Municipal Building Revenue
Bonds in an aggregate principal amount of $90,000 authorized by a resolution
of the Village Council dated July 16, 1958.
At December 31, 1959 the Village carried the following insurance
coverage relating to the Liquor Dispensary Fund:
Fire and extended coverage-
Building $40,000 180% co-insura~e)
Contents 6,400 80% cO-insurance~
stock 8,000 80% co-insurance
Public liability 100,000/300,000/5,000
Public employees' honesty
blanket bond 20,000
In addition, the Village carried robbery and safe burglary coverage, and
workmen's compensation insurance.
CO~~lliNTS ON FINANCIAL POSITION
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A statement of the sources and uses of funds from the date the
liquor dispensary came into existence to December 31, 1959 follows:
Funds were received from-
Proceeds of revenue bonds $ 90~000
Advances from general fund (net) 15,70Q.
$105,700
Funds were used to-
Purchase merchandise inventory $ 12,200
Purchase land, building, and furniture and
fixtures 87,600
Finance operating loss from date of commencing
operations to December 31, 1959, before
provision for depreciation of $2,600 5,700
Provide working cash, net of current accounts
payable and accrued liabilities 200
$105,700
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As reflected in the above summary, funds were provided from the proceeds
of the revenue bond issue and advances from the general fund and were
used principally to purchase fixed assets and merchandise inventory.
The physical inventory of the liquor dispensary was taken as of
December 31, 1959. A summary of inventory, at cost, as of December 31,
1959 follo\^Ts:
Liquor $10,700
vline 700
Beer 700
Miscellaneous 100
$12,200
The rate of inventory turnover for the year ended December 31, 1959 was
l.i 1 ",. computed on the ratio of cost of sales for the year to year
' . vlmes, end inventory.
A summary of fixed assets, at cost, setting forth the major
items carried on the records of the Liquor Dispensary Fund is presented
in the following summary:
Land and improvements-
Land $ 6,500
Grading and graveling 2,300
Black topping 2,500
Other 700 $12,000
Building- ~-
General construction $35,000
Heating and air conditioning 8,100
Electrical 3,200
Plumbing 3,700
.4rchi tect, legal and consultant fees 5,900
Other 800 56,700
Furniture and fixtures-
Neon sign $ 2,100
Refrigeration equipment 2,200
Bar and lounge fixtures 6,100
Cash registers 4,000
Liquor dispensers 2,200
Other 2,400 19,000
$87,700
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The Municipal Building Revenue Bonds payable are secured by the
net revenues of the liquor dispensary. The bonds mature serially and bear
interest (payable semi-annually) as follows:
Interest Rate
Due Date !!:.incipal (See No!~_
August 1- $ 4,000 4.2%
1961
1962 4,000 4.2
1963 5,000 4.2
1964 5,000 4.2
1965 5,000 4.2
1966 5,000 4.9
1967 8,000 4.9
1968 8,000 4.9
1969 8,000 4.9
1970 8,000 4.9
1971 10,000 4.9
1972 10,000 4.9
1973 10,000 4.9
$90,000
Note: In addition to the interest rates listed above, all bonds, bear an
additional interest rate of 1.1% for the period from August 1, 1958 to
August 1, 1962.
COf.~ffit~S ON OPERATIONS
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A condensed summary of operations for the year ended December 31,
1959 follows:
Sales $82,500
Cost of sales '" 49,222.
Gross profit on sales $33,300
Per cent to sales ., 40 .4%
Operating expenses-
Selling $14,100
Overhead 8,400
Administration and general --2.~g90
Total operating expense $31,700
Per cent to sales 38.4%
Operating income $ 1,600
Interest expense 5,200
Net loss for the year 3) 3~6oo
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The foregoing summary for the first full year of operation of the liquor
dispensary reflects sales of $82,500, a gross profit of $33,300 (40.4%),
operating expenses of $31,700 (38.4%) and operating income of $1,600.
An analysis of sales for the year is presented below:
On Sale Off Sale Total
Liquor $24,900 $24,500 $49,400
Beer 14,200 14,800 29,000
Wine - 1,600 1,600
Miscellaneous 1,600 900 2,500
$40.700 $41.800 $82.500
The division of sales as between on sale and off sale was approximately
the same amount. Liquor represented 60% of total sales and beer represented
35% of total sales for the year ended December 31, 1959.
The overall gross profit margin of 40.4% for the current year
compares favorably with the average gross profit of 35.4% for on sale and
off sale municipal liquor stores reflected in the Analysis of Municipal
Liquor Store Operations for 1958 prepared by the Department of Public
Examiner of the State of Minnesota.
Operating expenses as a per cent to sales are set forth in the
following summary:
Per Cent
Amount to Sales
Selling $14,100 17.1%
Overhead 8,400 10.2
Administration and general 9,200 11.1
131. 700 38.4%
Current years operating expenses of 38.4% of sales \'Jere substantially
higher than the average of 18.8% for on sale and off sale stores reflected
in the Analysis of Minnesota Municipal Liquor Store Operations for 1958.
A detailed listing of operating expenses is recorded in the accompanying
statement of income.
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SCOPE OF AUDIT
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Our examination included, but was not limited to, the fol1m'ling
procedures.
Cash on hand was counted by us at December 31, 1959. Cash in
bank was reconciled to the balance confirmed to us by the depositary as
of December 31, 1959.
The physical inventories were taken by Village officials as of
December 31, 1959. We observed the inventory taking, reviewed the
Village's procedures and made test counts of quantities in confirmation
of procedures followed. Our review indicated that satisfactory methods
had been employed in the determination of quantities. We made test checks
of the clerical accuracy and pricing of inventories which indicated they
were clerically accurate and priced at cost.
The amounts reflected as due to and due from the general fund
were reconciled with the balances recorded in the records of the general
fund.
Fixed asset accounts were reviewed, additions were test checked
to invoices, contracts and other supporting data, and Village officials
represented to us that physical retirements were properly reflected in
the accounts. Depreciation provisions were based on rates which appeared
reasonable in relation to the estimated lives of the depreciable property.
Insofar as we could ascertain from our examination, all direct
and contingent liabilities at December 31, 1959 are reflected in the
accompanying balance sheet and Village officials have represented that
all such liabilities were disclosed to us. We made test checks of
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the records of accounts payable and accrued liabilities and confirmed the
amounts owing to major suppliers at December 31, 1959 by direct corres-
pondence with the creditors. Municipal Building Revenue Bonds payable
were traced to the authorizing resolution. We traced the proceeds from
the bond issue to cash receipts of the liquor fund and reconciled the
interest paid to the paying agent with the outstanding bonds.
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VILLAGE OF ~~W HOPE
LIQUOR prSPENSARJ FUND
BALANCE SHEET - DECEMBER 31, 1959
A S S E T S
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CURRENT ASSETS:
Cash-
Cash on hand $ 600.00
Cash in bank--operation and maintenance 4,241.92 $ 4,841.92
account
Inventory, at cost 12,164.49
Due from general fund 49J . 61
Total current assets $ 17,504.02
FIXED ASSETS, at cost: $12,016.64
Land
Building 56,681.53
Furniture and fixtures 18,954.10
$87,652.27
Less- Accumulated depreciation ~. 2,618.40 85,033.87
$102,537.89
L I A B I I E S
CURRENT LIABILITIES:
Accounts pa;>,-able $ 1,208.00
Due to General Fund 16,214.57
Accrued Public Employees' Retirement Association
contributions 1,236.46
Accrued interest on Municipal Building Revenue
Bonds payable 2,182.92
Total current liabilities $ 20,841.95
~ill~ICIPAL BUILDING REV""E:NuE BONDS PAYABLE, (See Note) 90,000.00
SURPLUS ( it), per accompanying statement 8
$102,537.89
The accompanying note is an integral part of this
balance sheet.
NOTE TO FINANCIAL STATEMEr~S
The provision underlying the Municipal Building Revenue Bonds payable
provides, in part, the following:
a. Annual bond maturities vary from $4,000 to $10,000 for each year
beginning August 1, 1961 to 1973. Bonds maturing in the years
1961 through 1966 are payable on their respective maturity
dates without option of prior payment. Bonds maturing in the
years 1971 through 1973 are subject to redemption on or after
August 1, 1963 and bonds maturing in the years 1967 through
1970 are subject to redemption on or after August 1, 1966.
All prepayments are at the option of the Village and are
payable at par plus accrued interest and a premium of $50 per
$1,000 bond.
b. The annual interest on the bonds varies from 4.2% to 6.0%
dependent upon the year of interest payment and the date of
the serial maturity.
c. Bond interest and redemption shall be payable from the net
revenue, as defined. As of December 31, 1959 the Liquor
Dispensary Fund had no net revenue, as defined.
VILLAGE OF NEW HOPE
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LIQUOR DISPENSARY FUND
STATE~lliNT OF INCOtlli AND SURPLUS
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FOR THE -;fEAR END~D DEC~l:IB~.J959
INCOME
SALES:
On sale $40,667.80
Off sale 41,804.67
Total sales $82,472.47
COST OF SALES 49,168.08,
Gross profit on sales $33,304.39
Per cent to sales 40.4%
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OPERATING EXPENSES:
Selling-
Salaries $12,257.23
Laundry 191.07
Supplies 815.49
Licenses and taxes 74.52
Public Employee Retirement
Association contribution 768.00
Cash short __30.11, $14,136.42
Overhead-
Utilities $ 1,740.26
Maintenance of building and
. '" 309.58
equlpmenv
Cleaning and waste removal 1,371.35
Other contractual services 543.84
Supplies 41.90
Insurance 1,587.07
Property taxes 200.59
Depreciation 2,,618..42- 8,412.99
Administration and general-
Salaries $ 8,496.34
Conferences and travel 75.00
Office supplies 63.06
Public Employee Retirement
Association contribution 468.46
Miscellaneous 18..U, _9,1~ 31,670.40
Operating income $ 1,633.99
INTEREST EXPENSE 5,239.00
Net s for the year
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SURPLUS
BALANCE, DECEMBER 31, 1958, per Minnesota
Public Examiner's report:
Deficit (('
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Reserve for payment of bonds and interest 4,395.53
Reserve for construction ~.20" 82
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DEDUCT:
Insurance and salary expense capitalized
at December 31, 1958 $ 2,161.56
Interest accrued on bonds prior to
December 31, 1958, not recorded at
that date _?,9J..7 . )2 _~! 198" 95
BALANCE, DECElViBER 31, 1958 ( it ), 2
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as adjusted
DEDUCT: Net loss for the year ended
December 31, 1959 3,695.01
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BALANCE, DECEMBER 31, 1959 (de ., ,- )
.1.. t.;
The accompanying note is an integral part of this
statement of income and surplus.