The Cheesecake Factory Incorporated (NASDAQ: CAKE) operates over 200 restaurants and two bakeries in the United States. In its two bakeries, it bakes and prepares more than 70 desserts, both for its own use in its restaurants and for sale to a wide variety of wholesalers and retailers. The Cheesecake Factory’s inventories consist of restaurant food and supplies, bakery raw materials, and bakery finished goods. To account for its inventory, the company uses the average-cost method at its restaurants and the FIFO method at its bakeries. The Cheesecake Factory Incorporated’s from its 2016 Form 10-K are as follows:

The preceding have been condensed and adapted for educational use and should not be used for investment decisions.

Requirements

1. Give an example of an item that could be found in each of the following types of inventory for The Cheesecake Factory:

a. Restaurant food and supplies

b. Bakery finished goods and work in progress inventory

c. Bakery raw materials and supplies

2. In which financial statement is The Cheesecake Factory’s inventory found? What is the balance of the company’s inventory at January 3, 2017? At December 29, 2015?

3. In which financial statement is The Cheesecake Factory’s cost of sales found? What is its cost of sales for fiscal year ended January 3, 2017? For fiscal year ended December 29, 2015? For fiscal year ended December 30, 2014?

4. Calculate The Cheesecake Factory’s gross profit percentages for 2016 and 2015. Did its gross profit percentage improve or deteriorate from 2015 to 2016?

5. Calculate The Cheesecake Factory’s inventory turnover for 2016 and 2015. (The Cheesecake Factory’s inventory balance as of December 30, 2014, was $33,255 thousand.) Did the company’s inventory turnover speed up or slow down from 2015 to 2016?

6. Next, calculate the days’ inventory outstanding for 2016 and 2015. Do the number of days’ inventory outstanding make sense for The Cheesecake Factory? Why or why not?