Accounting Answers to Chapter 1
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P1-3A
Hightower Service Co.
Income Statement
For the Month Ended June 30th, 2014
Revenues:
Service revenue
$ 7,500
Total revenues
$ 7,500
Expenses:
Advertising expense
$ 400
Supplies expense
1000
Maintenance expense
Utilities expense
Salaries and wages expense
1400
Total expenses
$ 3700
Net Income
$ 3800
Hightower Service Co.
Statement of Retained Earnings
For the Month Ended June 30th, 2014
Retained earnings, June 1st 2014
Add: Net income
3,800
Less: Dividends paid
1,400
Retained earnings, June 30th 2014
$ 2,400
Hightower Service Co.
Balance Sheet
June 30th, 2014
Assets
$ 4,600
Accounts receivable
4,000
Supplies
2,400
Equipment
26,000
Total Assets
$ 37,000
Liabilities
Accounts payable
$ 500
Notes payable
12,000
Total Liabilities
12,500
Stockholders’ Equity
Common stock
$ 22,100
Retained earnings
2,400
Total Stockholders’ Equity
24,500
Total Liabilities and Stockholders’ Equity
$ 37,000
Hightower Company’s first month is considered to be successful with earnings of $3,800.
As a first month of conducting operations, Hightower should’ve retained all of its earning instead of paying dividends. This will ensure more investment and more money being put into the operations of the company. However, Hightower have retained a good amount, 63% of the earnings, to keep its operations running.
P2-2A
Tresh Corporation
Income statement
For the Year Ended December 31, 2014
Revenues:
Service revenue
$ 68,000
Total revenues
$ 68,000
Expenses:
Salaries and wages expense
$ 37,000
Utilities expense
2,000
Maintenance and repairs expense
1,800
Depreciation expense
3,600
Insurance expense
2,200
Total expenses
$ 46,600
Net Income
$ 21,400
Tresh Corporation
Statement of Retained Earnings
For the Year Ended December 31, 2014
Retained earnings, January 1st 2014
$ 31,000
Add: Net income
21,400
Less: Dividends paid
12,000
Retained earnings, December 31st 2014
$ 40,400
Tresh