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Case 1-1

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Submitted By ccliu
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Case 1-1
Prepared by
Chien-Chih Liu for Professor C. E. Reese in partial fulfillment of the Requirements for
ACC 770 – Managerial Accounting
School of Business/ Graduate studies
St. Thomas University Miami Gardens, FL
Term A2/ spring, 2011
`March 19, 2011

Table of Contents
Issues..........................................................................................................................................3
Facts...........................................................................................................................................3
Analysis......................................................................................................................................5
Conclusions/solutions/recommendations...................................................................................8

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 should you report the financial condition of the business on June 30, 2010? 3. Do you believe Carmen's first three months of operation could be characterized as "successful"? Explain your answer.
Facts
1. Carmen Diaz decided to open a small ribbon shop. Two of her cousins agreed to loan the business $10,000 for one year at a 6 percent interest rate. 2. On March 1, 2010, Carmen's uncle help him formally incorporated her business and waive her legal fee. 3. On March, 2010, Carmen deposited the cousins' $10,000 loan and her $1000 equity distribution. She also signed an agreement to rent store space for $600 per month, paid on the last day of the month. The agreement was for an 18-month period beginning April 1. The agreement called for a prepayment of

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