Donahoo sold $500,000 worth of furniture, for which it had paid $400,000. The furniture was sold for 10 percent cash down, with the remainder payable in 90 days. In addition, the firm paid a cash dividend of $100,000 to its stockholders and paid off $250,000 of its long-term debt.
Question 1 What did Donahoo's balance sheet look like at the outset of the firm's life?
Question 2 What did the firm's balance sheet look like after each transaction?
Question 3 Ignoring taxes, determine how much income Donahoo earned during January. Prepare an income statement for the month. Recognize an interest expense of 1 percent for the month (12 percent annually) on the $500,000 long-term debt, which has not been paid but is owed.
Question 4 What was Donahoo's cash flow for the month of January?