EXERCISE 1-3
| (a) | (b) |
Accounts payable and accrued liabilities | L | O |
Accounts receivable | A | O |
Property, plant, and equipment | A | I |
Food and beverage operations revenue | R | O |
Golf course operations revenue | R | O |
Inventory | A | O |
Long-term debt | L | F |
Office and general expense | E | O |
Professional fees expense | E | O |
Wages and benefits expense | E | O |
PROBLEM 1-3A
(a) ECKERSLEY SERVICE CO.
Income Statement
For the Month Ended June 30, 2010
Revenues
Revenue $7,000
Expenses
Wage expense $1,400
Supplies expense 1,000
Gas and oil expense 600
Advertising expense 400
Utilities expense 300
Total expenses 3,700
Net income $3,300
PROBLEM 1-3A (Continued)
ECKERSLEY SERVICE CO.
Retained Earnings Statement
For the Month Ended June 30, 2010
Retained earnings, June 1 $ 0
Add: Net income 3,300
3,300
Less: Dividends 2,000
Retained earnings, June 30 $1,300
ECKERSLEY SERVICE CO.
Balance Sheet
June 30, 2010
Assets
Cash $ 4,600
Accounts receivable 4,000
Supplies 2,400
Equipment 29,000
Total assets $40,000
Liabilities and Stockholders’ Equity
Liabilities
Notes payable $12,000
Accounts payable 500
Total liabilities $12,500
Stockholders’ equity
Common stock 26,200
Retained earnings 1,300 27,500
Total liabilities and stockholders’ equity $40,000
(b) Eckersley had a very successful first month, earning $3,300 or a 47% return on revenues of $7,000. Its net income represents a 13% return on the initial investment ($3,300 ÷ $26,200).
PROBLEM 1-3A (Continued)
(c) Distributing a dividend after only one month of operations is probably unusual. Most new businesses choose to build up a cash balance to...