Generally Accepted Accounting Principles and Diane Maynard
Case 2-1
Maynard Company (A) 2013 1
Diane Maynard made the following request of a friend:
My bookkeeper has quit, and I need to see the balance sheets of my company. He has left behind a book with the numbers already entered in it. Would you be willing to prepare balance sheets for me? Also, any comments you care to make about the numbers would be appreciated. The Cash account is healthy, which is a good sign, and he told me that the Net income for the month of June was $19,635.
The book contained a detailed record of transactions, and from it the friend was able to copy off the balances at the beginning of the month and the end of the month as shown in Exhibit 1. Diane Maynard owned all of the common shares of Maynard Company. At the end of June, Diane Maynard paid herself a $11,700 dividend and used the money to repay the loan from the company.
Questions:
1. Prepare balance sheets (statement of financial position) as of June 1 and as of
June 30, in proper format (classified).
2. Make comments about how the financial conditions as of the end of June compare with that at the beginning of June.
3. Why do retained earnings not increase by the amount of the June Net Income?
4. As of June 30, do you feel that Maynard Company is worth the amount in
Shareholders’ Equity, $619,446? Explain.
1
Adapted from Maynard Company (A), Robert Anthony, Harvard Business School
Exhibit 1
Maynard Company (A) 2013
Account Balances
June 1
June 30
$ 6,517
20,015
21,798
26,505
1,974
2,202
156,000
157,950
Accumulated depreciation on equipment
5,304
5,928
Bank notes payable
8,385
29,250
Building (at cost)
585,000
585,000
Common shares (Class A)
390,000
390,000
Cash
34,983
66,660
Equipment (at cost)
13,260
36,660
Land
89,700
89,700
Merchandise inventory
29,835
26,520
Note receivable, Diane Maynard
11,700
0
Other non-current assets
4,857
Maynard Company (A) 2013 1
Diane Maynard made the following request of a friend:
My bookkeeper has quit, and I need to see the balance sheets of my company. He has left behind a book with the numbers already entered in it. Would you be willing to prepare balance sheets for me? Also, any comments you care to make about the numbers would be appreciated. The Cash account is healthy, which is a good sign, and he told me that the Net income for the month of June was $19,635.
The book contained a detailed record of transactions, and from it the friend was able to copy off the balances at the beginning of the month and the end of the month as shown in Exhibit 1. Diane Maynard owned all of the common shares of Maynard Company. At the end of June, Diane Maynard paid herself a $11,700 dividend and used the money to repay the loan from the company.
Questions:
1. Prepare balance sheets (statement of financial position) as of June 1 and as of
June 30, in proper format (classified).
2. Make comments about how the financial conditions as of the end of June compare with that at the beginning of June.
3. Why do retained earnings not increase by the amount of the June Net Income?
4. As of June 30, do you feel that Maynard Company is worth the amount in
Shareholders’ Equity, $619,446? Explain.
1
Adapted from Maynard Company (A), Robert Anthony, Harvard Business School
Exhibit 1
Maynard Company (A) 2013
Account Balances
June 1
June 30
$ 6,517
20,015
21,798
26,505
1,974
2,202
156,000
157,950
Accumulated depreciation on equipment
5,304
5,928
Bank notes payable
8,385
29,250
Building (at cost)
585,000
585,000
Common shares (Class A)
390,000
390,000
Cash
34,983
66,660
Equipment (at cost)
13,260
36,660
Land
89,700
89,700
Merchandise inventory
29,835
26,520
Note receivable, Diane Maynard
11,700
0
Other non-current assets
4,857