Accounting text and cases ribbon and bows solution
Answers
Answer:
Explanation:
this is an introductory case and it should be taught as an introductory case.There will be plenty of time in the course for the students to learn the correct form of financial statements and details of accounting standards. In short,the instructor should be prepared to allow a variety of formats for the financial statements and tolerate some“not quite correct” accounting.The instructor may want to have students discuss Carmen’s March 31statement, but the bulk of the class should focus on the three case questions. Anydiscussion of the March 31 statement should deal with the nature of the variousaccounts (i.e. prepaid rent is rent paid in advance of using the property and it is an asset because it has future economic benefits for the company, etc), rather than the format of the statement. It is better to leave the beginning of the course’s instruction in financialstatement formats to the assigned case question discussions.
Comments on Information Gathered and Carmen’s Concerns
1.The three month sales total is the sum of the cash sales ($7,400) and credit sales($320).2.Cost of sales is derived from the following equationBeginning merchandise inventory$3,300Plus Purchases 2,900Equals Total available merchandise $6,200Less Ending merchandise inventory 4,100Equals Cost of sales$2,1003.Rent expense is $1,800 of $600 per month times three months. Paid in cash.4.Part-time employee expenses ($1600) is the sum of cash paid ($1510) plusamount owed ($90).5.Supplies expense ($80) is beginning supplies inventory ($100) less suppliesinventory on hand on March 31 ($20).6.The prepaid advertising ($150) was run by the local paper on April 2. The benefit of the asset expiredso the asset became an expense.7.The commercial sewing machine purchase led to an $1800 asset being recorded(a future benefit). The asset’s benefit was partly consumed during May andJune resulting in a $60 depreciation charge ($1800/ 5 years/ 12 months x 2months – straight line depreciation.)8.Some of the future benefits of the computer and related software asset wereconsumed during the three month period. A $250 depreciation charge must berecognized ($2000/ 2/ 12/ x 3 – straight line depreciation.)9.Cash balance at the end of period lower than beginning balance. See Question 1discussion.10.Four month’s interest must be recorded on the cousins’ $10,000 loan. ($10,000x .06 x 4/ 12). Carmen has “rented” the cousins’ money for four months. (Sheforgot to include the March rent in her March 31 balance sheet.)11.No depreciation is recorded on the cash register loaned by the local credit-cardcharge processor and the furniture left by the former tenant.These “assets”