Jacques Cupcake Shoppe FSET Analysis, Income Statement, Balance Sheet, Statement of Stockholders' Equity.

Y ou have two friends (Jacques and Gilles) who recently graduated from culinary school in France. You decided to invest in two cupcake shops and each friend will run one of the shops. Each will have full discretion over establishing and managing the businesses. On January 1, 2018, you gave Jacques 50,000 and Gilles 75,000 to start the businesses at the beginning of 2018 in exchange for 5,000 shares and 10,000 shares of common stock, respectively. Jacques and Gilles have each agreed to receive a starting salary of 40,000 per year. Jacques decided to focus on selling cupcakes directly to customers, so he opened a bakery and retail store in the 5th Arrondissement of Paris. On January 1, 2018, he purchased equipment for 21,000 and furniture for 11,000. At that time, he also purchased a store for 600,000. He paid 30,000 in cash and borrowed the remaining 570,000 from a bank. The bank loan has an interest rate of 6 percent a year. Jacques pays interest on the 10th of the month for the previous month's interest but will pay no principal until January 1, 2028, when the loan is due in full. Although the loan is for 10 years, Jacques expects to use the building for at least 30 years. Gilles decided to focus on selling cupcakes to restaurants and corporations, so he rented baking and office space in the 20th Arrondissement of Paris on January 1, 2018. He purchased equipment for 24,000 and a delivery truck for 30,000. Now, in early January 2019, you have flown to Paris from your home in the United States to meet with Jacques and Gilles and discuss the results of your investments. Jacques said: Business has been good. Customers come in and pay cash! when they purchase the cupcakes. This year I collected 410,000 in cash from my customers. Throughout the year, I've purchased and received 280,000 in baking and other supplies for the shop from various vendors. I pay cash when I purchase these items. I try to buy just what I Jacques continued: The bank loan isn't due until 2028 and I've been keeping current with the monthly interest payments of 2.850. I'll be paying December's interest in the next few days. Also, I recently wrote you a dividend check for 5,000. As we agreed, I received a salary of 40,000 for the year. Currently, I have 41,650 in the bank. Gilles spoke next: I've focused on selling to restaurants and corporations on credit, so they pay me later. I typically collect money within 30 days of making the sale. This year I sold 610,000 of merchandise; however, as of year-end, I've only collected 550,000 of this amount and my customers still owe me the remainder. With the state of the current economy, I'm worried about whether I'll be able to collect anywhere from 5,000 to 15,000 of what my customers still owe me. Throughout the year, I've also purchased baking and other supplies for the shop from various vendors. To receive quantity discounts and purchase the supplies for a slightly lower price, I purchase more at a time. This year purchased and received 505,000 of supplies. My vendors let me buy on credit and then pay them later. Thus, I still owe my vendors 25,000. Currently, I have about 10,000 of supplies that I haven't used that are at the bakery. Gilles continued: Business has been strong and I've been selling to a variety of places. I've put more miles on the delivery truck than I expected to, so it will only last another three years. I will probably need to replace the equipment after another two years. I've found a great location for my baking and office space, which I rent for only 1,400 a month. However, to get that low rent. I had to sign a three-year lease and must pay three months of rent at a time. At the end of December, I paid the landlord for rent through March 2019. Since the location is great and the rental rate is good, I didn't mind signing the three-year lease and having to pay rent in advance. I've also paid myself the 40,000 salary as we agreed. Currently, I have 30,000 in the bank. You told your friends that it seemed as though both businesses were doing well and you were happy with your investments. After they left, you begin to think about the cash you originally gave each of them and how each performed. "Yes," you think, they both did well. Gilles received more cash from customers, but Jacques has more cash in the bank. So, who did better? APPENDIX A 2018 Cash Transactions for Jacques' Cupcake Shoppe Beginning Cash Balance 0 CASH INFLOWS Initial investment 50,000 Cash from customers 410,000 Borrowed cash from the bank 570,000 Total Cash Inflows (receipts) 1,030,000 CASH OUTFLOWS Purchased store (no landjust the store) 600,000 Purchase of equipment 21,000 Purchase of furniture 11,000 Interest paid to bank (11 months) 31,350 Cash paid to vendors for baking and other supplies 280,000 Cash paid to Jacques for his salary 40,000 Cash paid to you 5,000 Total Cash Outflows (disbursements) 988,350 Ending Cash Balance 41,650 APPENDIX B 2018 Cash Transactions for Gilles' Cupcake Bakery Beginning Cash Balance 0 CASH INFLOWS Initial investment 75,000 Cash from customers 550,000 Total Cash Inflows (receipts) 625,000 CASH OUTFLOWS Purchase of equipment 24,000 Purchase of delivery truck 30,000 Cash paid to vendors for baking and other supplies 480,000 Cash paid to Gilles for his salary 40,000 Rent payments (15 months) 21,000 Total Cash Outflows (disbursements) 595,000 Ending Cash Balance 30,000 Y ou have two friends (Jacques and Gilles) who recently graduated from culinary school in France. You decided to invest in two cupcake shops and each friend will run one of the shops. Each will have full discretion over establishing and managing the businesses. On January 1, 2018, you gave Jacques 50,000 and Gilles 75,000 to start the businesses at the beginning of 2018 in exchange for 5,000 shares and 10,000 shares of common stock, respectively. Jacques and Gilles have each agreed to receive a starting salary of 40,000 per year. Jacques decided to focus on selling cupcakes directly to customers, so he opened a bakery and retail store in the 5th Arrondissement of Paris. On January 1, 2018, he purchased equipment for 21,000 and furniture for 11,000. At that time, he also purchased a store for 600,000. He paid 30,000 in cash and borrowed the remaining 570,000 from a bank. The bank loan has an interest rate of 6 percent a year. Jacques pays interest on the 10th of the month for the previous month's interest but will pay no principal until January 1, 2028, when the loan is due in full. Although the loan is for 10 years, Jacques expects to use the building for at least 30 years. Gilles decided to focus on selling cupcakes to restaurants and corporations, so he rented baking and office space in the 20th Arrondissement of Paris on January 1, 2018. He purchased equipment for 24,000 and a delivery truck for 30,000. Now, in early January 2019, you have flown to Paris from your home in the United States to meet with Jacques and Gilles and discuss the results of your investments. Jacques said: Business has been good. Customers come in and pay cash! when they purchase the cupcakes. This year I collected 410,000 in cash from my customers. Throughout the year, I've purchased and received 280,000 in baking and other supplies for the shop from various vendors. I pay cash when I purchase these items. I try to buy just what I Jacques continued: The bank loan isn't due until 2028 and I've been keeping current with the monthly interest payments of 2.850. I'll be paying December's interest in the next few days. Also, I recently wrote you a dividend check for 5,000. As we agreed, I received a salary of 40,000 for the year. Currently, I have 41,650 in the bank. Gilles spoke next: I've focused on selling to restaurants and corporations on credit, so they pay me later. I typically collect money within 30 days of making the sale. This year I sold 610,000 of merchandise; however, as of year-end, I've only collected 550,000 of this amount and my customers still owe me the remainder. With the state of the current economy, I'm worried about whether I'll be able to collect anywhere from 5,000 to 15,000 of what my customers still owe me. Throughout the year, I've also purchased baking and other supplies for the shop from various vendors. To receive quantity discounts and purchase the supplies for a slightly lower price, I purchase more at a time. This year purchased and received 505,000 of supplies. My vendors let me buy on credit and then pay them later. Thus, I still owe my vendors 25,000. Currently, I have about 10,000 of supplies that I haven't used that are at the bakery. Gilles continued: Business has been strong and I've been selling to a variety of places. I've put more miles on the delivery truck than I expected to, so it will only last another three years. I will probably need to replace the equipment after another two years. I've found a great location for my baking and office space, which I rent for only 1,400 a month. However, to get that low rent. I had to sign a three-year lease and must pay three months of rent at a time. At the end of December, I paid the landlord for rent through March 2019. Since the location is great and the rental rate is good, I didn't mind signing the three-year lease and having to pay rent in advance. I've also paid myself the 40,000 salary as we agreed. Currently, I have 30,000 in the bank. You told your friends that it seemed as though both businesses were doing well and you were happy with your investments. After they left, you begin to think about the cash you originally gave each of them and how each performed. "Yes," you think, they both did well. Gilles received more cash from customers, but Jacques has more cash in the bank. So, who did better? APPENDIX A 2018 Cash Transactions for Jacques' Cupcake Shoppe Beginning Cash Balance 0 CASH INFLOWS Initial investment 50,000 Cash from customers 410,000 Borrowed cash from the bank 570,000 Total Cash Inflows (receipts) 1,030,000 CASH OUTFLOWS Purchased store (no landjust the store) 600,000 Purchase of equipment 21,000 Purchase of furniture 11,000 Interest paid to bank (11 months) 31,350 Cash paid to vendors for baking and other supplies 280,000 Cash paid to Jacques for his salary 40,000 Cash paid to you 5,000 Total Cash Outflows (disbursements) 988,350 Ending Cash Balance 41,650 APPENDIX B 2018 Cash Transactions for Gilles' Cupcake Bakery Beginning Cash Balance 0 CASH INFLOWS Initial investment 75,000 Cash from customers 550,000 Total Cash Inflows (receipts) 625,000 CASH OUTFLOWS Purchase of equipment 24,000 Purchase of delivery truck 30,000 Cash paid to vendors for baking and other supplies 480,000 Cash paid to Gilles for his salary 40,000 Rent payments (15 months) 21,000 Total Cash Outflows (disbursements) 595,000 Ending Cash Balance 30,000