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AF2111 Template on analytical assignment - Write with BLUE point pen please.
How would you report on the three-month operations of Ribbons an' Bows, Inc.; through June 30 ( Use a few words to state the financial statements that you will use to communicate to users)?

Was the company profitable (show the relevant financial statement to explain whether the difference is positive or negative)?

Why did its cash in the bank decline during the three-month operating period (show the changes to cash)?


How would you report the financial condition of the business on June 30, 2010? (4.5 marks)


How are you going to address Carmen's four concerns above? Explain PRECISELY the proper reasons for the treatment. (4 marks)
i /No interest had been paid on the cousins' loan.



ii/The expenditures made for the desktop computer and its related software and the commercial sewing machine.
She believed these expenditures would be beneficial to the business long after June 30. At the time she purchased the commercial sewing machine, Carmen estimated that it would be used for about five years from its May 1 purchase date, when it would then have to be replaced. Similarly, on March 31, she had estimated the desktop computer and its software would have to be replaced in two years' time. Carmen believed the sewing machine and the computer along with its software would have no resale value at the end of their useful lives.




iii/The free legal work performed by her uncle and the free cash register provided by the local credit-card charge processor. The display furniture left behind by the previous tenant that Carmen could use at no cost to her. In addition, the landlord agreed to repaint the store at no cost to Carmen.

Free legal work



Free cash register



Free display furniture



Repaint by landlord

Do you believe Carmen's first three months of operation could be characterized as "successful"? Explain your answer with reference to the following: ( 4 marks )

Carmen had not paid herself a salary or dividends during the four months of operations.
If cash was available, she anticipated that sometime in July she would pay herself some compensation for the four months (including July) spent working in the business. Before stating her business, Carmen had worked for $1,300 a month as a cashier in a local grocery store .



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