Case 1 Sofia and Luisa Ruiz are sisters and have had a lifelong dream to open a bed and breakfast together named Dos Hermanas. They invested $200,000 of their own money, and the company issued common stock to them. The business then got a $200,000 bank loan for the total of $400,000 needed to get started. The company bought a Spanish mission style home in Santa Fe for $160,000. It was in need of renovations which cost another $100,000 They found most of the furniture at antique shops and fica markets--for a total cost of $40,000. Kitchen equipment cost $20,000, and a computer system cost $4,000 Prior to the grand opening, the banker requests a report on their activities thus far. The bank statement of Dos Hermanas shows a cash balance of 576,000. Sofin and Luisa believe that the $76,000 represents net income for the period, and they feel pretty good about the results of their business. To better understand how well they are doing, they prepare the following income statement for presentation to the bank: DOS HERMANAS BED AND BREAKFAST Income Statement Sex Months Faded Rune 30, 20XX Reves Camontok 1$ 200.000 200.000 S 100.000 Total Cost of the bu Renovation to the house Tume Kitchen Com Total Net Inc 160.000 100,000 10.000 20.000 4,000 334.000 S76,000 Requirements 1. Suppose you are the Ruiz sisters' banker, and they have given you this income statement. Would you congratulate them on their net income? If so, explain why. If not, how would you advise them to measure the net income of the business? Does the amount of cash in the bank measure net income? Explain 2. Prepare the balance sheet for Dos Hermanas based on these data