Bus 591 Week 1

Week One Homework Problems

Complete Problem 1-3B on page 36, 1-4B on page 37 (Chapter 1) and Problem 2-7B on page 90 (Chapter 2). Submit your work to your instructor by the posted due date. Show all your work in order to earn full credit!

P1-3B Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2012.

Credits Debits

45,000 94,278

1700

18,400

Net Profit/Loss -17,256

(b) Briefly discuss whether the company’s first month of operations was a success. The first month was not a success because there were extensive expenditures made and not sufficient enough credits in order to make a substantial profit.

(c) Discuss the company’s decision to distribute a dividend. The company’s decision to distribute a dividend was interesting as this decision was made very early on the process and may have given stockholder s an unfavorable impression when they became aware of it happening.

1-4 B

(a) Determine which items should be included in a statement of cash flows, and then prepare the statement for Rowe Corporation.

Common stock 20,000 Cash dividends paid 6,000

Instructions

Cash paid to purchase equipment $ 30,000

Equipment 40,000

Revenues 200,000

Cash received from customers 172,000

(b) Comment on the adequacy of net cash provided by operating activities to fund the company’s investing activities and dividend payments.

There is enough cash to fund these activities at the present time. It remains to be seen if there will be adequate cash available in the future in order to continue to fund these activities on a long-term basis.