Athena Riding Club's financial statements follow.
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Athena riding Club Income Statement
For the Month ended november 30, 2014
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| Revenues: |
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Riding lesson revenue
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$4,650
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Locker rental revenue
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1,450
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Total revenues Expenses:
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$6,100 |
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Salaries expense
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$1,125
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Feed expense
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750
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Utilities expense
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450
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Total expenses
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2,325 |
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Income before income taxes
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$3,775 |
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Income taxes expense
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725
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Net income
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$3,050 |
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Athena riding Club Statement of retained earnings
For the Month ended november 30, 2014
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Retained earnings, October 31, 2014
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$35,475
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Net income for the month
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3,050
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Subtotal
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$38,525
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Less dividends
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2,400
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Retained earnings, November 30, 2014
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$36,125
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Athena riding Club Balance Sheet november 30, 2014
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Assets
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Liabilities
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Cash
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$ 5,975
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Accounts payable
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$11,250
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Accounts receivable
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900
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Stockholders' equity
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|
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Supplies
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750
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Common stock
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$ 6,000
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Land
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15,750
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Retained earnings
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36,125
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Building
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22,500
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Total stockholders' equity
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$42,125
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Horses
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7,500
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Total assets
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$53,375
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Total liabilities and stockholders' equity
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$53,375
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Athena riding Club Statement of Cash Flows
For the Month ended November 30, 2014
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Cash flows from operating activities:
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Net income
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|
|
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Adjustments to reconcile net income to net cash flows
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$3,050
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from operating activities:
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Increase in accounts receivable
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$ (400)
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Increase in supplies
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(550)
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Increase in accounts payable
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400
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(550)
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Net cash flows from operating activities
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$2,500
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Purchase of horses
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$(2,000)
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Sale of horses
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1,000
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Net cash flows from investing activities
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(1,000)
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Cash flows from financing activities:
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Issuance of common stock
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$ 6,000
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Dividends paid
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(2,400)
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Net cash flows from financing activities
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3,600
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Net increase in cash
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$5,100
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Cash at beginning of month
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875
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Cash at end of month
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$5,975
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Required:
1. accounting Connection- Explain how Athena Riding Club's four statements relate to each other.
2. BUsiness application- Which statements are most closely associated with the goals of liquidity and profitability? Why?
3. BUsiness application- If you were the CEO of this business, how would you evaluate the company's performance? Give specific examples.
4. accoUnting Connection- If you were a banker considering Athena Riding Club for a loan, why might you want the company to be audited by an independent CPA? What would the audit tell you?