Acc 203 Problem 1-3B
PROBLEM 1-3B
(a)Special Delivery
Income Statement
For the Month Ended May 31, 2012
Revenues
Service revenue$10,400
Expenses
Salaries and wages expense$2,000
Maintenance and repairs expense 2,900
Advertising expense 800
Insurance expense 400
Total expenses 6,100
Net income$4,300
Special Delivery
Retained Earnings Statement
For the Month Ended May 31, 2012
Retained earnings, May 1$ 0
Add: ADVANCE \r 1 Net income 4,300 4,300
Less: Dividends 1,700
Retained earnings, May 31$2,600
Special Delivery
Balance Sheet
May 31, 2012
Assets
Cash$ 15,800
Accounts receivable 6,200
Equipment 56,000
Total assets$78,000
Liabilities and Stockholders’ Equity
Liabilities
Notes payable$28,000
Accounts payable 2,400
Total liabilities$30,400
Stockholders’ equity
Common stock 45,000
Retained earnings 2,600 47,600
Total liabilities and stockholders’ equity$78,000
(b)Special delivery had a successful first month, earning $4,300 or 41% of service revenues ($4,300 ÷ $10,400). Its net income represents a 9.5% return on the initial investment ($4,300 ÷ $45,000).
(c)Distributing a dividend after only one month of operations is probably unusual. Most new businesses choose to build up a cash balance to provide for future operating and investing activities or pay down debt. Special Delivery distributed 39.5% ($1,700 ÷ $4,300) of its first month’s income but it had adequate cash to do so and still showed a significant increase in retained earnings.
PROBLEM 3-5B (a)
Date Account Titles and Explanation Debit Credit
May1 Cash
Common Stock (Issued shares of stock for cash) 40,000 40,000
2 No entry—not a transaction. 3 Supplies
Accounts Payable ( Purchased supplies on account from Fleming Supply Company) 800 800
7 Rent Expense
Cash
( Paid monthly office rent) 1,400 1,400
11 Accounts Receivable
Service Revenue (Billed clients for services provided) 1,500 1,500
12 Cash
Unearned Service Revenue
(a)Special Delivery
Income Statement
For the Month Ended May 31, 2012
Revenues
Service revenue$10,400
Expenses
Salaries and wages expense$2,000
Maintenance and repairs expense 2,900
Advertising expense 800
Insurance expense 400
Total expenses 6,100
Net income$4,300
Special Delivery
Retained Earnings Statement
For the Month Ended May 31, 2012
Retained earnings, May 1$ 0
Add: ADVANCE \r 1 Net income 4,300 4,300
Less: Dividends 1,700
Retained earnings, May 31$2,600
Special Delivery
Balance Sheet
May 31, 2012
Assets
Cash$ 15,800
Accounts receivable 6,200
Equipment 56,000
Total assets$78,000
Liabilities and Stockholders’ Equity
Liabilities
Notes payable$28,000
Accounts payable 2,400
Total liabilities$30,400
Stockholders’ equity
Common stock 45,000
Retained earnings 2,600 47,600
Total liabilities and stockholders’ equity$78,000
(b)Special delivery had a successful first month, earning $4,300 or 41% of service revenues ($4,300 ÷ $10,400). Its net income represents a 9.5% return on the initial investment ($4,300 ÷ $45,000).
(c)Distributing a dividend after only one month of operations is probably unusual. Most new businesses choose to build up a cash balance to provide for future operating and investing activities or pay down debt. Special Delivery distributed 39.5% ($1,700 ÷ $4,300) of its first month’s income but it had adequate cash to do so and still showed a significant increase in retained earnings.
PROBLEM 3-5B (a)
Date Account Titles and Explanation Debit Credit
May1 Cash
Common Stock (Issued shares of stock for cash) 40,000 40,000
2 No entry—not a transaction. 3 Supplies
Accounts Payable ( Purchased supplies on account from Fleming Supply Company) 800 800
7 Rent Expense
Cash
( Paid monthly office rent) 1,400 1,400
11 Accounts Receivable
Service Revenue (Billed clients for services provided) 1,500 1,500
12 Cash
Unearned Service Revenue