The Cheesecake Factory Incorporated (NASDAQ: CAKE) was started by Evelyn Overton when she sold cheesecakes from her basement in Detroit in the 1940s. Its first restaurant opened in Beverly Hills in 1978. Cheesecake Factory has been a publicly held corporation since 1993 and currently has 185 restaurants and two bakery facilities. Its fiscal year end is the Tuesday closest to December 31 each year. To follow are Cheesecake Factory’s four basic financial statements for its most recent year, the year ending January 3, 2017.3

Please note that all statements have been adapted and condensed for educational use and should not be used for investment decisions.

Cheesecake Factory’s complete, unabridged financial statements can be found on its investor relations website.

Requirements

1. What form of business organization is The Cheesecake Factory? How do you know?

2. Identify what line item flows from the income statement to the statement of retained earnings.

3. Identify the line item that flows from the statement of retained earnings to the balance sheet.

4. Identify the line item that flows from the statement of cash flows to the balance sheet.

5. Did The Cheesecake Factory have net income or net loss for its fiscal year 2016? (The Cheesecake Factory’s 2016 fiscal year end is January 3, 2017.) Over what period of time was this amount earned?

6. Write The Cheesecake Factory’s accounting equation as of January 3, 2017.

7. How much in total resources does The Cheesecake Factory have to work with at January 3, 2017? How much does The Cheesecake Factory owe to creditors at January 3, 2017?

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The Cheesecake Factory Incorporated Consolidated Statement of Income (Adapted for Educational Use) For Year Ended January 3, 2017 (in thousands) Revenues 2,275,719 Costs and expenses: Cost of sales 526,628 759,998 88,010 Labor expenses Depreciation and amortization expense Other expenses Total costs and expenses Income from operations Interest and other expense, net Income before income taxes 700,090 2,074,726 200,993 (9,225) 191,768 52,274 139,494 Income tax expense Net income Note: Information presented here should not be used for investment decisions. The Cheesecake Factory Incorporated Statement of Retained Earnings (Adapted for Educational Use) For Year Ended January 3, 2017 (in thousands) Retained earnings balance, 12/29/2015 Add: Net income Less: Dividends declared Retained earnings balance, 1/3/2017 1,140,788 139,494 (42,270) 1,238,012 Note: Information presented here should not be used for investment decisions.