Description
The purpose of this assignment is to help students become familiar with the presentation of the income statement and the retained earnings statement, including how parts of the financial statement is evaluated to determine the operational success of the business.
Assignment Steps
Resources: Financial Accounting: Tools for Business Decision Making, p. 36
Scenario: On June 1, 2017, Elite Service Co. was started with an initial investment in the company of $22,100 cash. Below are the assets, liabilities, and common stock of the company June 30, 2017, 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 issues no additional stock but paid dividends of $1,400.
Prepare an income statement, retained earnings statement, and balance sheet analyzing your findings using the questions below, in a total of 1,050 words:
- Briefly address whether the company's first month of operations was a success.
- Discuss the company's decision to distribute a dividend
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Explanation & Answer
Attached.
P1-3A Prepare an income statement, retained earnings statement and balance sheet; discuss results
On June 1, 2017, Elite 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, 2017, and the revenues an
expenses for the month of June, its first month of operations:
Cash
Accounts receivable
Service revenue
Supplies
Advertising expense
Equipment
Common Stock
$4,600
4,000
7,500
2,400
400
26,000
22,100
In June, the company issued no additional stock but paid dividends of $1,400.
Instructions
(a)
Prepare an income statement and retained earnings statement for the month of June and a balance
at June 30, 2017.
(b)
Briefly discuss whether the company's first month of operations was a success.
(c ) Discuss the company's decision to distribute a dividend.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with
(a)
ELITE SERVICE CO.
Income Statement
For the Month Ended June 30, ...