Issues
1. a. How would you report on the three-month operations of Ribbons an’ Bows, Inc., through June 30?
b. Was the company profitable? (Ignore income taxes.)
c. Why did its cash in the bank decline during the three- month operating period?
2. How would you report the financial condition of the business on June 30, 2006?
3. Do you believe Carmen’s first three months of operation could be characterized as “successful”? Explain your answer.
1.
a. By the end of June 30, 2013, the sales for the 3 months is the cash sales ($7,400) and credit sales ($320). The net sale is $7,720.
The net sale form
Cash sales Credit sales Net sale
$7,400 $320 $7,720

The salary for the part-time employee is ($1,510) plus ($90) that is owed to the employee. So the total salary is $1,600.
The part-time employee’s salary form
Cash paid Owed total
$1,510 $90 $1,600

The rent for three-month period is $1,800 ($600 per month for three months).
The rent for space form
Rent for each month Mouth total
$600 3 $1,800
The cost for the inventory is $3,300 at the store opening date. She pays another $2,900 for replenishing the inventory on June 30, 2006. However, she estimates that there may be inventory on hand of $4,100.
The cost of inventory form
Beginning inventory replenishment total
$3,300 $2,900 $6,200
Inventory on hand $4,100
Final cost of inventory $2,100
At the beginning, the cost of supplies is $100. However, there is also $20 on hand. The total cost for supplies is $80.
The cost of supplies form
Beginning supplies Supplies on hand total
$100 $20 $80
Carmen estimates that the desktop computer can be used for two years. The cost is divided into the three month. The three month total is $250 ($2,000/2/12×3) ($2,000computer cost, 2 for two years, 12 for number of months in a year, and 3 for the months of April through June). She also calculated the