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    Financial and Management Accounting: BITS Pilani

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    rani rino
    The document is a case study about Ribbon an' Bows Inc., a business started by Carmen. It provides financial statements for the business including an assets/liabilities list as of March 2006, cash statement for June 2006, income statement for June 2006, and balance sheet as of June 30, 2006. It also poses four questions about analyzing the business's three-month performance based on the financial statements.

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    Financial and Management Accounting: BITS Pilani

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    rani rino
    99 views11 pages
    The document is a case study about Ribbon an' Bows Inc., a business started by Carmen. It provides financial statements for the business including an assets/liabilities list as of March 2006, cash statement for June 2006, income statement for June 2006, and balance sheet as of June 30, 2006. It also poses four questions about analyzing the business's three-month performance based on the financial statements.

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    Solution_Ribbon n Bows

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    The document is a case study about Ribbon an' Bows Inc., a business started by Carmen. It provides financial statements for the business including an assets/liabilities list as of March 2006, cash statement for June 2006, income statement for June 2006, and balance sheet as of June 30, 2006. It also poses four questions about analyzing the business's three-month performance based on the financial statements.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    99 views11 pages

    Financial and Management Accounting: BITS Pilani

    Uploaded by

    rani rino
    The document is a case study about Ribbon an' Bows Inc., a business started by Carmen. It provides financial statements for the business including an assets/liabilities list as of March 2006, cash statement for June 2006, income statement for June 2006, and balance sheet as of June 30, 2006. It also poses four questions about analyzing the business's three-month performance based on the financial statements.

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    Financial and

    Management
    Accounting By:
    BITS Pilani Dr. Vaishali Pagaria
    vaishali.pagaria@wilp.bits-pilani.ac.in
    Work Integrated Learning
    Programmes Division
    BITS Pilani
    Work Integrated Learning
    Programmes Division

    3. Ribbon an’ Bows Inc. Case Study


    HW 1: Case Study: Ribbon an’
    Bows, Inc.

    02/17/2022 Dr. Vaishali Pagaria 3 BITS Pilani, WILPD


    HW 1: Case Study: Ribbon an’
    Bows, Inc.

    02/17/2022 Dr. Vaishali Pagaria 4 BITS Pilani, WILPD


    HW 1: Case Study: Ribbon an’
    Bows, Inc.
    Ribbon an’ Bows, Inc.
    Assets and Capital Sources List, As on March 31, 2006
    Assets Amount Liability Amount
    (in $) (in $)

    Cash 4000 Cousin’s Loan (Long-term 10000


    Loan)
    Inventory 3300 Carmen’s Equity 1000
    Supplies 100
    Prepaid rent 1200
    Prepaid advertising 150
    Computer & Software 2000
    Cash Register Deposit 250
    Total 11000 Total 11000

    02/17/2022 Dr. Vaishali Pagaria 5 BITS Pilani, WILPD


    Case Study: Ribbon an’ Bows,
    Inc.
    1. How would you report on the three-month operations of Ribbon an’
    Bows, Inc., through June 30? Was the company profitable? (ignore
    income-taxes).
    2. Why did its cash in the bank decline during the three-month
    operating period?
    3. How would you report the financial condition of the business on
    June 30, 2006?
    4. Do you believe Carmen’s First three months of operation could be
    characterized as “successful”? Explain your answer.

    02/17/2022 Dr. Vaishali Pagaria 6 BITS Pilani, WILPD


    Case Study: Ribbon an’ Bows,
    Inc. – Solution
    Ribbon an’ Bows, Inc.
    Cash Statement for the Month End June 2006
    Cash Receipts Cash Payments
       
       
    Particulars Amount Amount Particulars Amount Amount
    Loan   10000 Rent   3000
    Equity   1000 Inventory   6200
    Sales   7400 Cash Register Deosit   250
          Store Supplies   100
          Advertisement   150
          Computer   2000
        Sewing machine   1800
          salary   1510
          Cash   3390
    Total   18400 Total   18400

    02/17/2022 Dr. Vaishali Pagaria 7 BITS Pilani, WILPD


    Case Study: Ribbon an’ Bows,
    Inc. – Solution
    Ribbon an’ Bows, Inc.
    Income Statement for the Month End June 2006
    Particulars Amount ($)
    sales 7720
    (-) Cost of sales* 2100
    Gross Income 5620
    Employee Wages 1600
    Rent 1800
    supplies expenses 80
    Pre-paid advertising expenses 150
    EBDIT 1990
    (-) Depreciation** 310
    EBIT 1680
    (-) Interest*** 200
    Net Profit 1480

    ** Sewing machine purchased in May. So the asset's benefit was partly consumed during May and June resulting in a $60
    depreciation charges (S1800/5years/12 months X 2months ---- Straight line depreciation)
    * *Some of the future benefits of the computer and related software asset were consumed during the three months. So the
    depreciation charges is $250 ($2000/2 years/12 months X 3 months) ---- Straight line depreciation method)
    *** Four months interest on loan from cousin = $10000X0.06X4months/12months

    02/17/2022 Dr. Vaishali Pagaria 8 BITS Pilani, WILPD


    Case Study: Ribbon an’ Bows,
    Inc. – Solution
    Ribbon an’ Bows, Inc.
    Balance Sheet as on 30th June 2006
    Liabilities Assets
    Particulars Amount ($) Particulars Amount ($)
    Loan 10000 Bank 3390
    Equity 1000 Prepaid Rent 1200
    Unpaid salary 90 Cash Reg. Deposit 250
    Upaid Interest 200 Computer (less dep.) 1750
    Profit 1480 Debtors 320
    Sewing Machine(Less
        dep.) 1740
        Stock in hand 4100
        Store supplies 20
           
    Total 12770 Total 12770
    02/17/2022 Dr. Vaishali Pagaria 9 BITS Pilani, WILPD
    Answers
    1. How would you report on the three-month operations of Ribbon an’ Bows,
    Inc., through June 30? Was the company profitable? (ignore income-taxes).

    Based on the Income Statement presented in the analysis, we can conclude that
    the company can be defined as profitable since it made $1480 in income
    before taxes during the first three months of operation. we recommend
    Carmen to continue increasing the sales in order to get more income and
    receive salary.

    2. Why did its cash in the bank decline during the three-month operating period?

    Based on the Statement of Cash Flow, we can conclude that Carmen spent
    more money in inventory than the cost of goods sold. So, we could recommend
    Carmen a better management of her inventory in order to avoid unnecessary
    expenses.

    02/17/2022 Dr. Vaishali Pagaria 10 BITS Pilani, WILPD


    Answers

    3. How would you report the financial condition of the business


    on June 30, 2006?
    company’s balance sheet and Income statement

    4. Do you believe Carmen’s First three months of operation


    could be characterized as “successful”? Explain your answer

    We conclude that Carmen’s first three months of operation


    could be characterized as successful. However, in order to
    pay back the loan and get salary, she would need to adjust
    some of her inventory’s expenses and increase the sales.

    02/17/2022 Dr. Vaishali Pagaria 11 BITS Pilani, WILPD

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