Special Delivery was started on May 1 with an investment of $45,000 cash. Following are the assets and liabilities of the company on May 31, 2012, and the revenues and expenses for the month of May, its first month of operations.
Accounts receivable $ 6,200 Notes payable $28,000
Service revenue 10,400 Salaries and wages expense 2,000
Advertising expense 800 Equipment 56,000
Accounts payable 2,400 Maintenance and repairs expense 2,900
Cash 15,800 Insurance expense 400
No additional common stock was issued in May, but a dividend of $1,700 in cash was paid.
a. Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2012.
b. Briefly discuss whether the company’s first month of operations was a success.
c. Discuss the company’s decision to distribute a dividend.