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.
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:
Maintenance and repairs expense
Salaries and wages expense
In June, the company issued no additional stock but paid dividends of $1,400.
(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.
(b) Briefly discuss whether the company’s first month of operations was a success.
(c) Discuss the company’s decision to distribute a dividend.