# Week 1 Accounting Homework

## Week 1 Accounting Homework

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
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
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...