On June 1 Eckersley 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 |
4,660 |
Notes payable |
12,000 |
|
Accounts receivable |
4,000 |
Accounts payable |
500 |
|
Revenue |
7,000 |
Supplies expense |
1,000 |
|
Supplies |
2,400 |
Gas and oil expense |
600 |
|
Advertising expense |
400 |
Utilities expense |
300 |
|
Equipment |
29,000 |
Wage expense |
1,400 |
In June, the company issued no additional stock, but paid dividends of $2,000.
Instructions
(a) Prepare an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2010.
(b) Briefly discuss whether the company’s first month of operations was a success.
(c) Discuss the company’s decision to distribute a dividend.