Preparation of Financial Statements for Shaw's Garden
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P1-3B Shaw's Garden was started on May 1 with an investment of $45,000 cash. Following are the assets, liabilities, and common stock of the company on May 31, 2014, and the revenues and expenses for the month of May, its first month of operations.
Accounts Receivable $ 8,400 Notes Payable $26,000
Service Revenue 10,400 Salaries and wages expense 1,900
Advertising expense 1,800 Equipment 58,800
Accounts payable 4,400 Maintenance and repairs expense 2,100
Cash 10,800 Insurance expense 400
Common stock 45,000
No additional common stock was issued in May, but a dividend of $1,600 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, 2014.
(b) Briefly discuss whether the company's first month of operations was a success.
(c) Discuss the company's decision to distribute a dividend.
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Solution Summary
The solution is presented in a word document showing the preparation of financial statements from the given data
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(a) Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2014.
SHAW'S GARDEN
Income Statement
For the Month Ended May 31, 2014
Revenues
Service Revenue $10,400
Expenses
Maintenance and repairs expense $2,100
Salaries and wages expense $1,900
Advertising expense $1,800
Insurance expense $400
Total expenses $6,200
Net income $4,200
SHAW'S ...
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
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