Cintas y Lazos Inc Case Solution

Case Solution

A present Cuban immigrant determines a completely new notions store. The very first 3-month, GAAP-based earnings statement differs from one produced by an economist friend. The store owner desires to know why one shows an earnings as well as the other a loss of profits.

Excel Calculations

·         Cashflow statement      

·         Balance Sheet                                  

·         Income Statement  

Questions Covered

1.       Prepare an income statement for three months operations of Cintas y Lazos, through June 30, 2007. Was the company profitable? Why did its cash in bank decline during the three-month operating period?

2.       Prepare a balance sheet for Cintas y Lazos on June 30, 2007.

3.       How successful has Cintas y Lazos been during the initial three months of operations? Which income statement - yours or the economist’s- did you find more useful for making this determination? Which financial statement was the more relevant? More reliable? Explain your answer.

4.       When Carmen’s economics professor friend broke “loose from the artificial boundaries of accounting,” what basic GAAP accounting rules and concepts did he violate? Do you believe the “boundaries” of GAAP should be expanded to include this non-GAAP accounting? Explain your answer.