Excercise 10 - ACCOUNTING Exercise 10 McDonald’s 1...

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Unformatted text preview: ACCOUNTING Exercise 10 McDonald’s 1 ECONOMIC EVENTS 2 1. Spend $50,000,000 for food (meat, bread fries, etc) and food containers. 2. Receive $100,000,000 cash from food sales. 3. Record $40,000,000 Cost of Sales. 4. Receive $5,000,000 revenues from franchised restaurants. 5. Receive a 1,000,000 Euros advertising invoice from agency in Europe. Exchange rate is $1.00 = 1 euro. 6. Pay $5,000,000 for salaries. 7. Receive $10,000,000 cash from issuing Bonds Payable. 8. Pay $1,000,000 to buy back some of the company’s own shares. 9. Pay $2,000,000 to buy shares of another company (short term). 10. Buy Euros to pay the advertising invoice. Exchange rate is $1.00 = 2 Euros. 11. Pay $1,000,000 interest on Bonds Payable. 12. Receive $50,000 cash dividend from our investment in other company’s stock. ECONOMIC EVENTS 3 13. Spend $500,000 on maintenance on restaurant properties. 14. Sell treasury stock for $1,300,000. 15. Sell stock in another company for $2,400,000. 16. Record $10,000,000 depreciation on restaurant properties. 17. Transfer Net Income (Loss) to Retained Earnings. JOURNAL ENTRIES 1. 2. 3. 4. 5. 4 JOURNAL ENTRIES 6. 7. 8. 9. 10. 5 JOURNAL ENTRIES 11. 12. 13. 14. 15. 6 JOURNAL ENTRIES 16. 17. 18. 19. 20. 7 Cash Reference Transaction Debit 8 Current Balance Credit Debit 500,000,000 Credit Restaurant Properties Reference Transaction Debit 9 Current Balance Credit Debit 300,000,000 Credit 10 Common Stock Reference Transaction Debit Current Balance Credit Debit Credit 400,000,000 11 Paid in Capital Reference Transaction Debit Current Balance Credit Debit Credit 200,000,000 Retained Earnings Reference Transaction Debit 12 Current Balance Credit Debit Credit 200,000,000 13 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 14 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 15 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 16 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 17 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 18 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 19 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 20 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 21 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 22 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 23 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 24 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 25 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 26 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 27 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 28 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 29 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 30 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 31 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 32 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 33 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 34 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 35 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 36 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit TRIAL BALANCE…page 1 Account Debit 37 Credit TRIAL BALANCE…page 2 Account Total Debit 38 Credit BALANCE SHEET Current Assets Current Liabilities Long Term Assets Long Term Liabilities Stockholders Equity Total Total 39 INCOME STATEMENT Revenue Expense Net Income (Loss) 40 41 JOURNAL ENTRY ANSWERS 1. Dr Inventory 50,000,000 Cr Cash 50,000,000 2. Cash 100,000,000 Cr Sales 100,000,000 3. Dr Cost of Sales 40,000,000 Cr Inventory 40,000,000 4. Dr Cash 5,000,000 Cr Franchise Revenue 5,000,000 5. Dr Advertising Expense 1,000,000 Cr Accounts Payable 1,000,000 42 JOURNAL ENTRY ANSWERS 6. Dr Salaries Expense 5,000,000 Cr Cash 5,000,000 7. Dr Cash 10,000,000 Cr Bonds Payable 10,000,000 8. Dr Treasury Stock 1,000,000 Cr Cash 1,000,000 9. Dr Stock Investment 2,000,000 Cr Cash 2,000,000 10. Dr Accounts Payable 1,000,000 Cr Cash (1,000,000 / 2.00) 500,000 Cr Foreign Exchange Gain 500,000 43 JOURNAL ENTRY ANSWERS 11. Dr Interest Expense 1,000,000 Cr Cash 1,000,000 12. Dr Cash 50,000 Cr Dividend Revenue 50,000 13. Dr Maintenance Expense 500,000 Cr Cash 500,000 14. Dr Cash 1,300,000 Cr Treasury Stock 1,000,000 Cr PIC Treasury Stock 300,000 15. Dr Cash 2,400,000 Cr Stock Investment 2,000,000 Cr Gain on Sale 400,000 44 JOURNAL ENTRY ANSWERS 16. Dr Depreciation Expense 10,000,000 Cr Accumulated Depreciation 10,000,000 17. Dr Net Income 48,450,000 Cr Retained Earnings 48,450,000 45 Cash Reference Transaction Debit Current Balance Credit Debit 500,000,000 GJ1 50,000,000 450,000,000 GJ2 100,000,000 550,000,000 GJ4 5,000,000 555,000,000 GJ6 GJ7 5,000,000 10,000,000 550,000,000 560,000,000 GJ8 1,000,000 559,000,000 GJ9 2,000,000 557,000,000 GJ10 500,000 556,500,000 GJ11 1,000,000 555,500,000 GJ12 50,000 GJ13 555,550,000 500,000 555,050,000 GJ14 1,300,000 556,350,000 GJ15 2,400,000 558,750,000 Credit Restaurant Properties Reference Transaction Debit 46 Current Balance Credit Debit 300,000,000 Credit 47 Common Stock Reference Transaction Debit Current Balance Credit Debit Credit 400,000,000 48 Paid in Capital Reference Transaction Debit Current Balance Credit Debit Credit 200,000,000 Retained Earnings Reference Transaction Debit 49 Current Balance Credit Debit Credit 200,000,000 GJ17 48,450,000 248,450,000 50 Inventory Reference Transaction Debit GJ1 GJ3 Current Balance Credit 50,000,000 Debit 50,000,000 40,000,000 10,000,000 Credit 51 Sales Reference Transaction Debit GJ2 Current Balance Credit 100,000,000 Debit Credit 100,000,000 52 Cost of Sales Reference Transaction Debit GJ3 40,000,000 Current Balance Credit Debit 40,000,000 Credit Franchise Revenue Reference Transaction Debit GJ4 53 Current Balance Credit 5,000,000 Debit Credit 5,000,000 Advertising Expense Reference Transaction Debit GJ5 1,000,000 54 Current Balance Credit Debit 1,000,000 Credit 55 Accounts Payable Reference Transaction Debit GJ5 GJ10 Current Balance Credit 1,000,000 1,000,000 Debit Credit 1,000,000 0 56 Salaries Expense Reference Transaction Debit GJ6 5,000,000 Current Balance Credit Debit 5,000,000 Credit 57 Bonds Payable Reference Transaction Debit GJ7 Current Balance Credit 10,000,000 Debit Credit 10,000,000 58 Treasury Stock Reference Transaction Debit GJ8 GJ14 Current Balance Credit 1,000,000 Debit Credit 1,000,000 1,000,000 0 59 Stock Investment Reference Transaction Debit GJ9 GJ15 Current Balance Credit 2,000,000 Debit Credit 2,000,000 2,000,000 0 Foreign Exchange Gain Reference Transaction Debit GJ10 60 Current Balance Credit 500,000 Debit Credit 500,000 61 Interest Expense Reference Transaction Debit GJ11 1,000,000 Current Balance Credit Debit 1,000,000 Credit Depreciation Expense Reference Transaction Debit GJ16 10,000,000 62 Current Balance Credit Debit 10,000,000 Credit 63 Accumulated Depreciation Reference Transaction Debit GJ16 Current Balance Credit 10,000,000 Debit Credit 10,000,000 Dividend Revenue Reference Transaction Debit GJ12 64 Current Balance Credit 50,000 Debit Credit 50,000 Maintenance Expense Reference Transaction Debit GJ13 500,000 65 Current Balance Credit Debit 500,000 Credit PIC Treasury Stock Reference Transaction Debit GJ14 66 Current Balance Credit 300,000 Debit Credit 300,000 67 Gain on Sale Reference Transaction Debit GJ15 Current Balance Credit 400,000 Debit Credit 400,000 68 Net Income Reference Transaction Debit GJ13 48,450,000 Current Balance Credit Debit 48,450,000 Credit TRIAL BALANCE…..page 1 Account 69 Debit Credit Cash 558,750,000 Restaurant Properties 300,000,000 Common Stock 400,000,000 Paid in Capital 200,000,000 Retained Earnings 248,450,000 Inventory 10,000,000 Sales Cost of Sales 100,000,000 40,000,000 Franchise Revenue Advertising Expense 5,000,000 1,000,000 Accounts Payable Salaries Expense 0 5,000,000 Bonds Payable 10,000,000 Treasury Stock 0 Stock Investment 0 Foreign Exchange Gain 500,000 Interest Expense 1,000,000 Depreciation Expense 10,000,000 Accumulated Depreciation Dividend Revenue 10,000,000 50,000 TRIAL BALANCE…..page 2 Account Maintenance Expense Debit 70 Credit 500,000 PIC Treasury Stock 300,000 Gain on Sale 400,000 Net Income 48,450,000 Total 974,700,000 974,700,000 BALANCE SHEET Current Assets 71 Current Liabilities Cash 558,750,000 Inventory 10,000,000 Long Term Assets Long Term Liabilities Restaurant Properties 300,000,000 Accum Depreciation (10,000,000) Net Book Value 290,000,000 Bonds Payable 10,000,000 Stockholders Equity Common Stock Paid in Capital 248,450,000 PIC Treasury Stock 858,750,000 200,000,000 Retained Earnings Total 400,000,000 300,000 Total 858,750,000 INCOME STATEMENT 72 Revenue Sales 100,000,000 Cost of Sales 40,000,000 Gross Profit 60,000,000 Franchise Revenue 5,000,000 Foreign Exchange Gain 500,000 Gain on Sale 400,000 Dividend Revenue 50,000 Expense Advertising Expense 1,000,000 Salaries Expense 5,000,000 Interest Expense 1,000,000 Depreciation Expense 10,000,000 Maintenance Expense 500,000 Net Income (Loss) 48,450,000 73 McDonalds Video Today, how much would it cost to open a McDonald’s 1. 2. 3. 4. $500,000 $1,000,000 $1,500,000 $2,000,000 15 0% $500,000 0% 0% $1,000,000 $1,500,000 0% $2,000,000 74 McDonalds Video Number one sales volume item at McDonald’s 15 0% So ft dr in k s s 0% Fr ie 0% er s 3. ur g 2. Burgers Fries Soft drinks B 1. 75 McDonalds Video The most important element at McDonald’s 0% 0% oo m st r re n Cl ea 0% s ce rv i Se rin k Fr ie s s 0% ft d 5. 0% So 4. 15 rs 3. ur ge 2. Burgers Fries Soft drinks Service Clean restrooms B 1. 76 1. Spend $50,000,000 for food . ry 50 ... h5 0,0 00 ,00 0 nto Dr nv e dI Fo o Dr Ca s 00 ,00 0 0,0 ,... h5 50 se Ca s Dr xp en 4. 0% 0% 0% 0% dE 3. 15 Fo o 2. Dr Food Expense 50,000,000 Cr Cash 50,000,000 Dr Cash 50,000,000 Cr Food Expense 50,000,000 Dr Food Inventory 50,000,000 Cr Cash 50,000,000 Dr Cash 50,000,000 Cr Food Dr 1. 77 2. Receive $100,000,000 cash from food sales. 15 Dr Ca sh 10 0,0 00 ,0 00 Cr Sales 100,000,000 0% 10 0,0 00 ,00 0 0% Sa les 2. Dr Sales 100,000,000 Cr Cash 100,000,000 Dr Cash 100,000,000 Dr 1. 78 3. Record $40,000,000 Cost of Sales. 15 Dr Inventory 40,000,000 Cr Cost of Sales 40,000,000 Dr Cost of Sales 40,000,000 Cr Inventory 40,000,000 Dr Inventory Expense 40,000,000 Cr Inventory 40,000,000 Dr Inventory 40,000,000 Cr Inventory Expense 40,000,000 3. 4. 0% 0% 0% 0% Inv ent ory 4 Dr Cos 0,000 ,00 t of 0 Sal Dr es Inv 40 ent ory ,0.. Dr Expe Inv ent nse. . ory 40, 000 ,00 0 2. Dr 1. 79 4. Receive $5,000,000 revenues from franchised restaurants. 15 0% eR eve nu. .. 5, 0 00, 000 0% Dr Fra nch is Ca sh 2. Dr Cash 5,000,000 Cr Franchise Revenue 5,000,000 Dr Franchise Revenue 5,000,000 Cr Cash 5,000,000 Dr 1. 80 5. Receive a 1,000,000 Euros advertising invoice from agency in Europe. Exchange rate is $1.00 = 1.00 euro. 15 0% xpe n. gE rtis in Dr A dve aya b le.. 0% unt sP 2. Dr Accounts Payable 5,000,000 Cr Advertising Expense 5,000,000 Dr Advertising Expense 5,000,000 Cr Accounts Payable 5,000,000 Dr A cco 1. 81 6. Pay $5,000,000 for salaries. 15 0% 5,00 Dr C ash nse .. 0,00 0 0% xp e 2. Dr Salaries Expense 5,000,000 Cr Cash 5,000,000 Dr Cash 5,000,000 Cr Salaries Expense 5,000,000 Dr S al ar ies E 1. 82 7. Receive $10,000,000 cash from issuing Bonds Payable. 15 0% Dr Bo nds P aya b le 1 0.. 10, 0 00 ,00 0 0% Cas h 2. Dr Cash 10,000,000 Cr Bonds Payable 10,000,000 Dr Bonds Payable 10,000,000 Cr Cash 10,000,000 Dr 1. 83 8. Pay $1,000,000 to buy back some of the company’s own shares. 3. 4. 0% 0% 0% 0% ,000 I Dr T nvestm reas e u ry n t . . Sto c Dr Ck 1,0. . ash 1,00 0,00 0 Dr Stock Investment 1,000,000 Cr Cash 1,000,000 Dr Treasury Stock 1,000,000 Cr Cash 1,000,000 Dr Cash 1,000,000 Cr Stock Investment 1,000,000 ,000 2. Dr S tock Dr Cash 1,000,000 Cr Treasury Stock 1,000,000 Dr C ash 1 1. 15 84 9. Pay $2,000,000 to buy shares of another company (short term). Dr Stock Investment 2,000,000 Cr Cash 2,000,000 Dr Treasury Stock 2,000,000 Cr Cash 2,000,000 Dr Cash 2,000,000 Cr Stock Investment 2,000,000 ,00 0 ves tm Tre ent asu .. ry Sto ck Dr 2, 0.. Ca . sh 2,0 00 2,0 00, 000 Dr 4. 0% 0% 0% 0% Ca sh 3. Sto ck In 2. 15 Dr Dr Cash 2,000,000 Cr Treasury Stock 2,000,000 Dr 1. 85 10. Buy Euros to pay the 1,000,000 euro advertising invoice. Exchange rate is $1.00 = 2.00 Euros. Cash paid…..1,000,000 / 2.00 = 500,000 Gain…..A/P 1,000,000 – payment 500,000 = 500,000 aya b unt le.. sP aya ble .. Acc o Dr Dr Acc o unt sP aya b le.. ,000 unt sP 1,00 0 Acc o 4. 0% 0% 0% 0% Cas h 3. 15 Dr 2. Dr Cash 1,000,000 Cr Accounts Payable 1,000,000 Dr Accounts Payable 1,000,000 Cr Cash 1,000,000 Dr Accounts Payable 1,000,000 Cr Cash 500,000 Cr Foreign Exchange Gain 500,000 Dr Accounts Payable 1,000,000 Cr Cash 500,000 Cr Advertising Expense 500,000 Dr 1. 86 11. Pay $1,000,000 interest on Bonds Payable. 15 0% h1 ns e1 ,00 ... 0,0 0 0 0% Dr Int e res tE xp e Ca s 2. Dr Cash 1,000,000 Cr Interest Expense 1,000,000 Dr Interest Expense 1,000,000 Cr Cash 1,000,000 Dr 1. 87 12. Receive $50,000 cash dividend from our investment in other company’s stock. 15 0% 0% ue. . Cas h5 0,0 00 end Rev en Div id Dr 2. Dr Cash 50,000 Cr Dividend Revenue 50,000 Dr Dividend Revenue 50,000 Cr Cash 50,000 Dr 1. 88 13. Spend $500,000 on maintenance on restaurant properties. 3. 4. 15 0% 0% 0% 0% Res tau ran tP Dr rop Ma e inte nan r... ce Ex Dr p... Ca sh 500 ,00 Dr 0 Cas h5 00, 000 2. Dr Restaurant Properties 500,000 Cr Cash 500,000 Dr Maintenance Expense 500,000 Cr Cash 500,000 Dr Cash 500,000 Cr Maintenance Expense 500,000 Dr Cash 500,000 Cr Restaurant Properties 500,000 Dr 1. 89 14. Sell treasury stock for $1,300,000. Gain…..Sale 1,300,000 – cost 1,000,000 = 300,000 Ca sh 1,3 00, 000 000 Dr Dr Ca sh 1,3 00, 000 0% 0% 0% 1, 3 00, 3. 15 Ca sh 2. Dr Cash 1,300,000 Cr Treasury Stock 1,000,000 Cr Gain on Sale 300,000 Dr Cash 1,300,000 Cr Treasury Stock 1,000,000 Cr Retained Earnings 300,000 Dr Cash 1,300,000 Cr Treasury Stock 1,000,000 Cr PIC Treasury Stock 300,000 Dr 1. 90 15. Sell stock in another company for $2,400,000. Gain…..Sale 2,400,000 – cost 2,000,000 – 400,000 000 ves tm D r en t . . Ca . sh Dr 2, 4 Sto 00, ck 000 Inv est me nt . . 2, 4 00, Sto ck In 4. 0% 0% 0% 0% Ca sh 3. 15 Dr 2. Dr Cash 2,400,000 Cr Stock Investment 2,000,000 Cr Gain on Sale 400,000 Dr Stock Investment 2,000,000 Dr Loss on Sale 400,000 Cr Cash 2,400,000 Dr Cash 2,400,000 Cr Stock Investment 2,400,000 Dr Stock Investment 2,400,000 Dr 1. 91 16. Record $10,000,000 depreciation on restaurant properties. Pr o pe rec r... iat ion Dr Ac Ex p. . cu . mu lat ed De pr. .. Dr De p ura nt Ex p. . . Re sta cia tio n 4. 0% 0% 0% 0% Dr 3. 15 De pre 2. Dr Depreciation Expense 10,000,000 Cr Restaurant Properties 10,000,000 Dr Restaurant Properties 10,000,000 Dr Depreciation Expense 10,000,000 Dr Depreciation Expense 10,000,000 Cr Accumulated Depreciation 10,000,000 Dr Accumulated Depreciation 10,000,000 Cr Depreciation Expense 10,000,000 Dr 1. 92 17. Transfer 48,450,000 Net Income to Retained Earnings. 15 Dr Re ta i ne dE arn ing s e4 8,4 50. Inc om 0% .. .. 0% Ne t 2. Dr Net Income 48,450,000 Cr Retained Earnings 48,450,000 Dr Retained Earnings 48,450,000 Dr Net Income 48,450,000 Dr 1. MCDONALDS 93 94 FORGING RELATIONSHIPS GREED 95 96 ...
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This note was uploaded on 11/03/2010 for the course ACCT 325 taught by Professor Anderson,p during the Winter '09 term at Azusa Pacific.

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