1. A summary of cash transactions is provided in the Appendixes. Based on the cash transactions, who appears to have done better? Include which components you considered in your answer. 2. Explain what should be considered when deciding who did better"'? 3. Now based on the income statements provided at the end of this document who "did better? Include which components you considered in your answer. 4. Now based on the balance sheet what evidence is there regarding who "did better"? Include which components you considered in your answer. 5. Review the building purchase arrangement that Raphael has committed to and compare the total reported cost of the current year with the rent expense that Gabriel has arranged. What, if any, benefit is there in owning the building and what do you foresee as a likely outcome of the current loan arrangement? What's your view regarding the business decision to purchase the building? 6. The statements of cash flows provided at the end of this document reports cash activities from operating, investing, and financing. Which company had better cash from operations? What is the critical factor when comparing cash from operations between the two companies? APPENDIX A 2018 Cash Transactions for Raphael's Cupcake Shoppe 0 Beginning Cash Balance CASH INFLOWS USA Initial Investment Cash from customers Borrowed cash from the bank Total Cash Inflows (Receipts) 50,000 410,000 570,000 1,030,000 b 0 CASH OUTFLOWS Purchase store (no land, just 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 Raphael for salary 40,000 Cash paid to you 5,000 Total Cash Outflows (disbursements) 988,350 Ending Cash Balance vino 41,650 1000000.2 mois APPENDIX B 2018 Cash Transactions for Gabriel's Cupcake Bakery 0 Beginning Cash Balance CASH INFLOWS Initial Investment Cash from customers Total Cash Inflows (Receipts) 75,000 550,000 625,000 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 Gabriel for salary 40,000 Rent payments (15 months) 21,000 Total Cash Outflows (disbursements) 595,000 Ending Cash Balance 30,000 Raphael's Cupcake Shoppe Income Statement For the Year ended December 31, 2018 Revenues Cash from Customers 410,000 280,000 (100) 279.900 130,100 Cost of Sales Cost of Baking Goods Cash Paid to Vendors Inventory on Hand Total Cost of Baking Goods Gross Profit Operating Expenses Raphael's Salary Depreciation Equipment Depreciation Building Furniture expense Total Operating Expenses Operating Income Interest Expense Cash Paid to Bank Interest Expense Accrued Total Interest Expense Income before Taxes 40,000 5.250 20,000 11,000 76,250 53,850 31,350 2850 34200 19,650 Raphael's Cupcake Shoppe Balance Sheet As of December 31, 2018 41,650 100 41,750 Assets Cash Inventory Current Assets Equipment 21,000 Building 600.000 Accumulated Depreciation (25250) Net Property, Plant, & Equipment TOTAL ASSETS 595,750 637,500 2,850 570,000 572,850 Liabilities Accrued Interest Expense Long-term Debt to Bank Total Liabilities Stockholders' Equity Common Stock Retained Earnings Total Stockholders' Equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 50,000 14,650 64,650 637,500 Gabriel's Cupcake Bakery Income Statement For the Year ended December 31, 2018 Revenues Cash from Customers Doe from Customers Total Revenue 550.000 60,000 610.000 450,000 25000 (10.000) 499.000 115,000 Cost of Sales Cost of Baling Goods Cash Paid to Vendors Due to Venders Inventory on Hand Total Cost of Baking Goods Gross Profit Operating Expenses Gabriel's Salary Rent Expense Bad Debt Expense Depreciation Equipment Depreciation Delivery Van Total Operating Expenses Operating Income Interest Expense 40,000 16,800 10,000 8000 7,500 82.300 32,700 Income before Taxes 32.700 Gabriel's Cupcake Bakery Balance Sheet As of December 31, 2018 Assets Cash Accounts Receivable, Net Inventory Prepaid Rent Current Assets Delivery Van 30,000 Equipment 24,000 Accumulated Depreciation (15.500) Net Property, Plant, & Equipment TOTAL ASSETS 30,000 50,000 10,000 4.200 94,200 38,500 132,700 Liabilities Due to Suppliers 25,000 75,000 32,700 Stockholders' Equity Common Stock Retained Earnings Total Stockholders' Equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 107,700 132.700 Raphael's Cupcake Shoppe Statement of Cash Flows For the Year ended December 31, 2018 410,000 Operating Activities Cash from Customers Cash paid for Expenses Vendors Employee-Raphael Interest Expense Total Expense Paid Net Cash from Operating Activities (280,000) (40,000) (31,350) (351,350) 58,650 Investing Activities Equipment Purchases (62,000) Financing Activities Sale of Stock Dividends Paid Net Cash from Financing Activities 50,000 (5,000) 45,000 Change in Cash 41,650 Beginning Cash Ending Cash 41,650 Non-Cash Investing / Financing Activities Bank Loan to finance purchase of Store 570,000 Gabriel's Cupcake Bakery Statement of Cash Flows For the Year ended December 31, 2018 550,000 Operating Activities Cash from Customers Cash paid for Expenses Vendors Employee-Gabriel Rent Total Expense Paid Net Cash from Operating Activities (480,000) (40,000) (21,000) (541,000) 9,000 Investing Activities Equipment Purchases (54,000) Financing Activities Sale of Stock 75,000 Change in Cash 30,000 Beginning Cash Ending Cash 30,000