Refer to the facts in the attached case, then prepare an income statement and balance sheet for each company for 2019. Prepare your financial statements in Excel, although any legible submission will be accepted.  Also include a brief analysis of your answer to, "Who did better?"
 
 

 

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Two of your friends (Pierre and Marie) 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, 2019, you gave Pierre €50,000 and Marie €75,000 to start the businesses at the beginning of 2019 in exchange for 5,000 shares and 10,000 shares of common stock, respectively. Pierre and Marie have each agreed to receive a starting salary of €40,000 per year. Pierre 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, 2019, he purchased equipment for €21,000 and furniture for €11,000. At that time, he also purchased a store for €500,000. He paid €30,000 in cash and borrowed the remaining €470,000 from a bank. The bank loan has an interest rate of 6 percent a year. Pierre pays interest on the 10th of the month for the previous month's interest but will pay no principal until January 1, 2029, when the loan is due in full. Although the loan is for 10 years, Pierre expects to use the building for at least 30 years. Marie decided to focus on selling cupcakes to restaurants and corporations, so she rented baking and office space in the 20th Arrondissement of Paris on January 1, 2019. She 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 Pierre and Marie and discuss the results of your investments. Pierre 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. (Like many retail businesses, Pierre considers credit cards from customers the same as cash because credit card companies transfer cash to the business within a few days of the transaction.) 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 need, so I only have about €100 of unused supplies in the shop at any point in time. The shop is working out great and the customers love it. However, there has been more wear and tear on the furniture than I expected, so I'1l be replacing most of the furniture in the next few weeks and that will cost me €17,000. Fortunately, the equipment I purchased is probably good for another three years. PETIT GÂTEAU CASE Two of your friends (Pierre and Marie) 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, 2019, you gave Pierre €50,000 and Marie €75,000 to start the businesses at the beginning of 2019 in exchange for 5,000 shares and 10,000 shares of common stock, respectively. Pierre and Marie have each agreed to receive a starting salary of €40,000 per year. Pierre 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, 2019, he purchased equipment for €21,000 and furniture for €11,000. At that time, he also purchased a store for €500,000. He paid €30,000 in cash and borrowed the remaining €470,000 from a bank. The bank loan has an interest rate of 6 percent a year. Pierre pays interest on the 10th of the month for the previous month's interest but will pay no principal until January 1, 2029, when the loan is due in full. Although the loan is for 10 years, Pierre expects to use the building for at least 30 years. Marie decided to focus on selling cupcakes to restaurants and corporations, so she rented baking and office space in the 20th Arrondissement of Paris on January 1, 2019. She 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 Pierre and Marie and discuss the results of your investments. Pierre 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. (Like many retail businesses, Pierre considers credit cards from customers the same as cash because credit card companies transfer cash to the business within a few days of the transaction.) 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 need, so I only have about €100 of unused supplies in the shop at any point in time. The shop is working out great and the customers love it. However, there has been more wear and tear on the furniture than I expected, so I'1l be replacing most of the furniture in the next few weeks and that will cost me €17,000. Fortunately, the equipment I purchased is probably good for another three years. PETIT GÂTEAU CASE

Answer rating: 100% (QA)

Conclusion As per our analyse if We considered who did better busine... View the full answer