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 | 4,600 | 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.
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