Special Delivery was started on May 1 with an investment of $45,000 cash. Following are the assets and liabilities of the company on May 31, 2012, and the revenues and expenses for the month of May, its first month of operations.
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Accounts receivable
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$6,200
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Notes payable
|
$28,000
|
|
Service revenue
|
10,400
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Salaries and wages expense
|
2,000
|
|
Advertising expense
|
800
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Equipment
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56,000
|
|
Accounts payable
|
2,400
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Maintenance and repairs expense
|
2,900
|
|
Cash
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15,800
|
Insurance expense
|
400
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No additional common stock was issued in May, but a dividend of $1,700 in cash was paid.
Instructions
(a) Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2012.
(b) Briefly discuss whether the company"s first month of operations was a success.
(c) Discuss the company"s decision to distribute a dividend.