Acc300 Week 2

Problem Set 1

ACC/300

Problem Set 1

(Chapter 1 - P1-3A)

On June 1, Beardsley Service Co. was started with an initial investment in the company of $22,100 cash. Here are the assets and liabilities 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 |

In June, the company issued no additional stock, but paid dividends of $1,400.

Prepare an income statement, retained earnings statement, and balance sheet; discuss results.

(SO 4, 5), AP

Instructions

1. Prepare an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2012.

2. Briefly discuss whether the company’s first month of operations was a success.

3. Discuss the company’s decision to distribute a dividend.

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 |

A)

Income Statement for the month of June 30th, 2012

Particulars | Details $ | Amount $ |

Service Revenue (A) | | 7,500 |

Less Expenses | | |

Supplies Expense | 1,000 | |

Repairs and Maintenance Expense | 600 | |

Advertising Expense | 400 | |

Utilities Expense | 300 | |

Salaries and wages Expense | 1,400 | |

Total Expenses (B) | | (3,700) |

Net Income (A-B) | | 3,800 |

Statement of Retained Earnings for the month of June

Particulars | Details $ |

Net Income | 3,800 |

Less Dividend | (1,400) |

Retained Earnings | 2,400 |

Balance sheet for the month of June

Liabilities | Amount $ |...