In January 2010, Carmen Diaz, a recent arrival from Cuba, decided to open a small ribbon shop in the Coconut Grove section of Miami, Florida. During the month, she put together a simple business plan, which she took to several relatives whom she believed would be interested in helping her finance the new venture. Two of her cousins agreed to loan the business $ 10,000 for one year at a 6 percent interest rate. For her part. Carmen agreed to invest $1,000 in the equity of the business.
EXHIBIT 1
Carmen's March 31, 2010, Ribbons an' Bows Assets and Capital Sources List

1. How would you report on the three-month operations of Ribbons an' Bows, Inc., through June 30? Was the company profitable? (Ignore income taxes.) 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 June 30, 2010?
3. Do you believe Carmen's first three months of operation could be characterized as "successful'"? Explain your answer.

Sources of Assets Capital 4,000 3,300 100 1,200 150 Cash Inventory Supplies Prepaid rent Prepaid advertising Computer/ Sottware Cash register deposit Cousin's 2,000 loan $10,000 Carmen's 250 equity 1,000 $11,000 $11,000