Term Project: Annual report for Cookie Chronicle

(Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 12.)

The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2018 for the years 2018 and 2017, the statement of cash flows for the year ended October 31, 2018, and the income statements for the years ended October 31, 2017 and 2018, are presented below.

COOKIE & COFFEE CREATIONS INC.

Balance Sheet

October 31

Assets		2018		2017
Cash		$ 22,324		$ 5,550
Accounts receivable		3,250		2,710
Inventory		7,897		7,450
Prepaid expenses		5,800		6,050
Equipment		102,000		75,500
Accumulated depreciation		(25,200)		(9,100)
Total assets		$116,071		$88,160
Liabilities and Stockholders? Equity
Accounts payable	$ 1,150		$ 2,450
Income taxes payable	9,251		7,200
Dividends payable	27,000		27,000
Salaries and wages payable	7,250		1,280
Interest payable	188		0
Note payable?current portion	4,000		0
Note payable?long-term portion	6,000		0
Preferred stock, no par, $6 cumulative?
3,000 and 2,800 shares issued,
respectively	15,000		14,000
Common stock, $1 par?25,180
shares issued	25,180		25,180
Additional paid in capital?treasury stock	250		250
Retained earnings	20,802		10,800
Total liabilities and stockholders? equity	$116,071		$88,160

COOKIE & COFFEE CREATIONS INC.

Statement of Cash Flows

for the Year Ended October 31, 2018

Cash flows from operating activities

Cash receipts from customers ................................. ??????$485,085

Cash payments

To suppliers ........................................................... $224,441

For operating expenses and salaries ................. ?189,945

For interest ................................................................... 225

For income tax ....................................................... ?7,200 (421,811)

Net cash provided by operating activities....................................... 63,274

Cash flows from investing activities

Sale of computer equipment ...................................... $ 500

Purchase of kitchen equipment...................................(2,000)

Purchase of computer equipment.............................. (4,000)

Purchase of furniture and fixtures ............................. (13,000)

Net cash used by investing activities............................................ (18,500)

Cash flows from financing activities

Issuance of preferred stock....................................... $ 1,000

Principal repayment of notes payable ....................... (2,000)

Payment of cash dividends ..................................... (27,000)

Net cash used by financing activities .......................................... (28,000)

Net increase in cash.......................................................................... 16,774

Cash, November 1............................................................................. 5,550

Cash, October 31.................................................................... ?? $ 22,324

Noncash investing and financing activities

Issuance of note payable to purchase kitchen equipment ............ $ 12,000

COOKIE & COFFEE CREATIONS INC.

Income Statement

For the Year Ended October 31

	2018		2017
Sales	$485,625		$462,500
Cost of goods sold	222,694		208,125
Gross profit	262,931		254,375
Operating expenses Salaries and wages expense	147,979		146,350
Depreciation expense	17,600		9,100
Other operating expenses	48,186		42,925
Total operating expenses	213,765		198,375
Income from operations	49,166		56,000
Other expenses Interest expense	413		0
Loss on disposal of plant assets	2,500		0
Total other expenses	2,913		0
Income before income tax	46,253		56,000
Income tax expense	9,251		14,000
Net income	$ 37,002		$ 42,000

Additional information: Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more kitchen equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semi-annual payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance.

Instructions

Requirements: Prepare the 2018 annual report for Cookie $ Coffee Creations Inc., including

1. Corporate Profile and Financial highlights

2. Management?s Discussion and Analysis

Note: Report your analysis about the potential impact of borrowing an additional $20,000 to buy more kitchen equipment on the financial condition of the company as the last item in Management?s Discussion and Analysis.

3. Financial Statements (an income statement and a balance sheet for two years, a statement of cash flows and a retained earnings statement for one year).

4. Notes to the Financial Statements

5. Supplementary Financial Information

(a) Prepare a horizontal analysis of the income statement and balance sheet for Cookie & Coffee Creations Inc. using 2017 as a base year.

(b) Prepare a vertical analysis of the income statement and balance sheet for Cookie & Coffee Creations Inc. for 2018 and 2017.

Term Project: Annual report for Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 12.) The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2018 for the years 2018 and 2017, the statement of cash flows for the year ended October 31, 2018, and the income statements for the years ended October 31, 2017 and 2018, are presented below. COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31 Assets Cash 2018 2017 $ 22,324 $ 5,550 Accounts receivable 3,250 2,710 Inventory 7,897 7,450 Prepaid expenses 5,800 6,050 102,000 75,500 Accumulated depreciation (25,200) (9,100) Total assets $116,071 $88,160 $ 1,150 $ 2,450 9,251 7,200 27,000 27,000 7,250 1,280 188 0 Note payablecurrent portion 4,000 0 Note payablelong-term portion 6,000 0 15,000 14,000 25,180 25,180 250 250 20,802 10,800 $116,071 $88,160 Equipment Liabilities and Stockholders' Equity Accounts payable Income taxes payable Dividends payable Salaries and wages payable Interest payable Preferred stock, no par, $6 cumulative 3,000 and 2,800 shares issued, respectively Common stock, $1 par25,180 shares issued Additional paid in capitaltreasury stock Retained earnings Total liabilities and stockholders' equity Page 1 of 3 COOKIE & COFFEE CREATIONS INC. Statement of Cash Flows for the Year Ended October 31, 2018 Cash flows from operating activities Cash receipts from customers ................................. ..................$485,085 Cash payments To suppliers ........................................................... $224,441 For operating expenses and salaries ................. ...189,945 For interest ................................................................... 225 For income tax ....................................................... ...7,200 (421,811) Net cash provided by operating activities....................................... 63,274 Cash flows from investing activities Sale of computer equipment ...................................... $ 500 Purchase of kitchen equipment...................................(2,000) Purchase of computer equipment.............................. (4,000) Purchase of furniture and fixtures ............................. (13,000) Net cash used by investing activities............................................ (18,500) Cash flows from financing activities Issuance of preferred stock....................................... $ 1,000 Principal repayment of notes payable ....................... (2,000) Payment of cash dividends ..................................... (27,000) Net cash used by financing activities .......................................... (28,000) Net increase in cash.......................................................................... 16,774 Cash, November 1............................................................................. 5,550 Cash, October 31.................................................................... ...... $ 22,324 Noncash investing and financing activities Issuance of note payable to purchase kitchen equipment ............ $ 12,000 Page 2 of 8 COOKIE & COFFEE CREATIONS INC. Income Statement For the Year Ended October 31 2018 Sales 2017 $485,625 $462,500 Cost of goods sold 222,694 208,125 Gross profit 262,931 254,375 147,979 146,350 Depreciation expense 17,600 9,100 Other operating expenses 48,186 42,925 Total operating expenses 213,765 198,375 49,166 56,000 413 0 2,500 0 Total other expenses 2,913 0 Income before income tax 46,253 56,000 9,251 14,000 $ 37,002 $ 42,000 Operating expenses Salaries and wages expense Income from operations Other expenses Interest expense Loss on disposal of plant assets Income tax expense Net income Additional information: Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more kitchen equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semi-annual payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Instructions Requirements: Prepare the 2018 annual report for Cookie $ Coffee Creations Inc., including 1. 2. 3. 4. 5. Corporate Profile and Financial highlights Management's Discussion and Analysis Note: Report your analysis about the potential impact of borrowing an additional $20,000 to buy more kitchen equipment on the financial condition of the company as the last item in Management's Discussion and Analysis. Financial Statements (an income statement and a balance sheet for two years, a statement of cash flows and a retained earnings statement for one year). Notes to the Financial Statements Supplementary Financial Information (a) Prepare a horizontal analysis of the income statement and balance sheet for Cookie & Coffee Creations Inc. using 2017 as a base year. (b) Prepare a vertical analysis of the income statement and balance sheet for Cookie & Coffee Creations Inc. for 2018 and 2017. Grading: 1. Each groupwith a maximum of 6 studentsshould submit a hard copy by the due date for grading. 2. 5 points based on the formality and language proficiency in writing. 3. 25 points based on the comprehensive analysis of the above items (5 points each). Page 3 of 8