Prepare an income statement and a retained earnings

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Reference no: EM13482968

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.

Instructions

(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.

Reference no: EM13482968

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