I need help with an accounting problem
In each situation,
state whether the decision-maker would be most likely to place primary emphasis
on information provided by the income statement, balance sheet, or statement of
cash flows. In each case provide a brief justification for your choice. Choose only
one financial statement in each case.
P1-3A
On June 1, Hightower
Service Co. was started with an initial investment in the company of $22,100
cash. Here are the assets, liabilities, and common stock of the company at June
30, and the revenues and expenses for the month of June, its first month of
operations:
Cash
|
$ 4,600
|
Notes payable
|
$12,000
|
Accounts receivable
|
4,000
|
Accounts payable
|
500
|
Service revenue
|
7,500
|
Supplies expense
|
1,000
|
Supplies
|
2,400
|
Maintenance and repairs expense
|
600
|
Advertising expense
|
400
|
Utilities expense
|
300
|
Equipment
|
26,000
|
Salaries and wages expense
|
1,400
|
Common stock
|
22,100
|
|
|
In June, the company issued no additional stock but paid
dividends of $1,400.
Instructions
- (a) Prepare an
income statement and a retained earnings statement for the month of June
and a balance sheet at June 30, 2014.
Marginal check figures (in blue) provide a key
number to let you know you are on the right track.
(a)
|
Net income
|
$ 3,800
|
Ret. earnings
|
$ 2,400
|
|
Tot. assets
|
$37,000
|
- (b) Briefly
discuss whether the company’s first month of operations was a success. - (c) Discuss the
company’s decision to distribute a dividend.