Preparation of income statement and retained earnings.
On June 1 Fix-It-Up Service Co. was started with an initial investment in the company of $26,200 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
|
$14,000
|
|
Accounts receivable
|
4,000
|
Accounts payable
|
500
|
|
Revenue
|
8,000
|
Supplies
|
1,000
|
|
Supplies
|
2,400
|
Gas and oil expense
|
600
|
|
Advertising expense
|
400
|
Utilities expense
|
300
|
|
Equipment
|
32,000
|
Wage expense
|
1,400
|
In June, the company issued no additional stock, but paid dividends of $2,000.
Instructions
a) Prepare an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2007.
b) Briefly discuss whether the company's first month of operations was a success.
c) Discuss the company's decision to distribute a dividend.