Professional Documents
Culture Documents
Case 1-1
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.
paid $7,400 cash for ribbons and accessories, but she was still owed $320
for ribbon agreements for a large wedding delivered to the customer. A
part-time employee had been paid $1,510 but was still owed $90 for work
performance. Rent for the three-month period had been paid in cash the
end of each month. Inventory replenishments costing $2,900 had been
delivered. Carmen estimated the June 30 merchandise inventory on hand
had cost $4,100. The small opening office supplies inventory was nearly all
gone. She estimated supplies costing $20 had not been used.
7. She was puzzled by the fact that the cash in the company's June 30
bank account was $3,390, which was less than the April 1 balance of
$4,000.
8. Carmen was concerned about how she should reflect the following in her
financial report which are no interest had been paid on the cousin's loan
and the free legal performance by her uncle and the free cash register
provided by the local credit-card charge processor.
9. Carmen had not paid herself as salary or dividends during the four
months of operations. And she prepared to get some compensation in July
if cash was available. Before staring her business, she had worked for
$1,300 a month as a cashier in a local grocery store.
Analysis
1a.
Customer has paid ($7,400) cash for ribbons and accessories and credit
sales ($320). Cost of sales is derived from the following equation:
beginning merchandise inventory ($3,300) plus purchases ($2,900) less
ending merchandise inventory $4,100 equals cost of sales $2,100. Rent
expense is $1,800 of $600 per month times three months. Part-time
employee expenses ($1,600) is the sum of cash paid ($1510) plus amount
owed ($90). The prepaid advertising ($150) was run by the local paper on
April2. The benefit of the asset expired so the asset became an expense.
The commercial sewing machine purchased led to a $1,800 asset being
recorded. The asset's benefit was partly consumed during May and June
resulting in a $60 depreciation charge. Some of the future benefits of the
computer and related software asset were consumed during the three