Table of Contents
Issues 1
Facts 1
Analysis 3 Question 1 3
a. Report on the three-month operation of Ribbons an’ Bows, Inc. 3
b. Profit of the Company 4
c. The reason for the cash in the bank decline 5 Question 2 6 Question 3 8
Conclusions 9
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 June30, 2010? 3. Do you believe Carmen’s first three months of operation could be characterized as “successful”? Explain your answer.
Facts
1.
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Profit of the Company
The income statement presents the company was profitable if Carmen ignore income taxes, because the company has a net income $1,480 before taxes. c. The reason for the cash in the bank decline
April balance of the $4,000, so beginning cash was $4,000.Carmen got cash sales revenue $7,400, less paid cash $1,510 for employee wages, less paid replenishment inventory $2,900,less rent for three-month $1,800, less paid cash $1,800 for sewing machine. Finally the ending cash was $3,390. According to above details , the statement of cash flow for the three-month operations of Ribbons an’ Bows, Inc., can be created as follows.
Ribbons an’ Bows, Inc.
Statement of cash flow
As of June 30, 2010
Beginning cash $4,000
Sales $7,400
Merchandise inventory ($2,900)
Wages (1,510)
Rent for three month ($1,800)
Sewing machine ($1,800)
Cash and cash equivalents on June 30 $3,390
According to the cash flow statement, the commercial sewing machine purchase for $1800,
Management should note that the level of activity was above what had been planned for the month. This led to an expected increase in profits of $1,100. However, the individual items on the report should not receive much management attention. The favorable variance for revenue and the unfavorable variances for expenses are entirely caused by the increase in activity.
15. How has the company’s stock been performing in the last 5 years? Steadily rising since 1/2009. Declining from 2007 – 2009 as expected due to the recession and the change in demand for construction.
To consider this I will be looking at the Income Statement. If the company’s revenue exceeds its expenses it will report net income or will report a net loss. This will report on the success or failure of the company’s operation by reporting its revenue and expenses.
Each Friday, the cash clerk records the amount of cash receive and deposit the money in the bank account. Each quarter, the controller requests information from the bank necessary to prepare bank reconciliation.
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The revenue is $600,600*1.2= $720,720. The variable cost changes as sales increases and fixed cost stays the same, the gross profit is $175,500. After tax, the net income is $100,557.
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