I need help with an accounting problem

Nov 6th, 2015
FratBro23
Category:
Accounting
Price: $40 USD

Question description

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.



 

Tutor Answer

(Top Tutor) Daniel C.
(997)
School: UT Austin
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