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Chapter 2 introduction to financial statements 85

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Chapter 2 Introduction to Financial Statements85
Statement of Owner’s EquityLet’s create the statement of owner’s equity for Cheesy Chuck’s for the month of June. Since Cheesy Chuck’s isa brand-new business, there is no beginning balance of Owner’s Equity. The first items to account for are theincreases in value/equity, which are investments by owners and net income. As you look at the accountinginformation you were provided, you recognize the amount invested by the owner, Chuck, was $12,500. Next,we account for the increase in value as a result of net income, which was determined in the income statementto be $5,800. Next, we determine if there were any activities that decreased the value of the business. Morespecifically, we are accounting for the value of distributions to the owners and net loss, if any.It is important to note that an organization will have either net income or net loss for the period, but not both.Also, small businesses in particular may have periods where there are no investments by, or distributions to,the owner(s). For the month of June, Chuck withdrew $1,450 from the business. This is a good time to recall theC O N C E P T S I N P R A C T I C EMcDonald’sFor the year ended December 31, 2016,McDonald’shad sales of $24.6 billion.[11]The amount of sales isoften used by the business as the starting point for planning the next year. No doubt, there are a lot ofpeople involved in the planning for a business the size ofMcDonald’s. Two key people atMcDonald’sarethe purchasing manager and the sales manager (although they might have different titles). Let’s look athowMcDonald’s2016 sales amount might be used by each of these individuals. In each case, do notforget thatMcDonald’sis a global company.A purchasing manager atMcDonald’s, for example, is responsible for finding suppliers, negotiatingcosts, arranging for delivery, and many other functions necessary to have the ingredients ready for thestores to prepare the food for their customers. Expecting thatMcDonald’swill have over $24 billion ofsales during 2017, how many eggs do you think the purchasing manager atMcDonald’swould need topurchase for the year? According to theMcDonald’swebsite, the company uses over two billion eggs ayear.[12]Take a moment to list the details that would have to be coordinated in order to purchase anddeliver over two billion eggs to the manyMcDonald’srestaurants around the world.A sales manager is responsible for establishing and attaining sales goals within the company. AssumethatMcDonald’s2017 sales are expected to exceed the amount of sales in 2016. What conclusions wouldyou make based on this information? What do you think might be influencing these amounts? Whatfactors do you think would be important to the sales manager in deciding what action, if any, to take?

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Term
Winter
Professor
Horngren
Tags
Business, Test, Privately held company, Public company

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