2. 1. Prepare balance sheets as of June 1
and as of June 30, in proper format.
Balance Sheet as on June 1
Liabilities Amount ($) Assets
Amount
($)
Capital Stock 390000Land 89700
Other Non-current
liabilities 2451
Building
585000
Accounts Payable 8517Less:Depreciation 248960 336040
Wages Payable 1974Equipment 13260
Bank Notes Payable 8385Less:Depreciation 6804 6456
Tax Payable 5700Merchandise Inventory 29835
Retained Earnings 127051Supplies on hand 5559
Other non-current assets 4857
Pre-paid insurance 3150
Cash 34983
Accounts Receivable 21798
Notes receivable (Diane
Maynard) 11700
544078 544078
Balance Sheet as on June 30
Liabilities Amount ($) Assets Amount ($)
Capital Stock 390000Land 89700
Other Non-current liabilities 2451
Building
585000
Accounts Payable 21315Less:Depreciation 287680 297320
Wages Payable 2202
Equipment
36660
Bank Notes Payable 29250Less:Depreciation 7325 29335
Tax Payable 7224Merchandise Inventory 26520
Retained Earnings 98319Supplies on hand 6630
Other non-current assets 5265
Pre-paid insurance 2826
Cash 66660
Accounts Receivable 26505
550761 550761
3. 2. Make comments about how the financial
condition as of the end of June compared
with that at the beginning of June.
Comparing the balance sheets of the 1st of June with that of the 30th of June,
it can be seen that there was purchase of equipment. This improved the
output of the company, and hence the sales and revenues. As a result, the
stock in hand decreased, the cash balance and accounts receivable increased
and the taxes to be paid went up. Even so, there is a considerable amount
owed to the creditors of the business.
The equipment seem to have been bought on loan as we can see an increase
in the bank notes payable. The notes receivable from Diane Maynard was
completely paid off by her by June 30th using the cash she took out as
dividend.
4. 3. Why do retained earnings not increase by
the amount of June net income?
Even though the company benefitted from a net income of $19,635, it does
not show in the retained earnings as Diane Maynard paid herself a dividend of
$11,700 and the remaining difference of $36,667 seems to have been
transferred to the cash account.
Remaining Cash difference = Retained Earnings (June 1) + Net income –
Retained earnings (June 30) – Dividends paid to Maynard
= $127051 + $19635 - $98319 -$11700 = $36,667
5. 4. As of June 30, do you feel that Maynard
Company is worth the amount in
Shareholder’s Equity, $619,446? Explain.
Shareholders equity implies the company’s net worth. Here we can see that
Maynard Company has an equity share capital worth $488319 as on June 30th,
therefore we can conclude that the company is not worth $619446.