Problem:
On June 1 Fix-It-Up Service Co. was started with an initial investment in the company of $26,200 cash. Here are the assets and liabilities of the company at June 30, and the revenues and expenses for the month of June, its first month of operations:
Cash $ 4,600 Notes payable $14,000
Accounts receivable 4,000 Accounts payable 500
Revenue 8,000 Supplies expense 1,000
Supplies 2,400 Gas and oil expense 600
Advertising expense 400 Utilities expense 300
Equipment 32,000 Wage expense 1,400
In June, the company issued no additional stock, but paid dividends of $2,000.
a) Prepare an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2007.
b) Briefly discuss whether the company’s first month of operations was a success.
c) Discuss the company’s decision to distribute a dividend.