Problem 1-5 Income Statement, Statement of Retained Earnings, and Balance Sheet

Question

Problem 1-5 Income Statement, Statement of Retained Earnings, and Balance Sheet

The following list, in alphabetical order, shows the various items that regularly appear on the financial statements of Maple Park Theatres Corp. The amounts shown for balance sheet items are balances as of September 30, 2010 (with the exception of retained earn- ings, which is the balance on September 1, 2010), and the amounts shown for income statement items are balances for the month ended September 30, 2010.

Accounts payable $17,600
accounts receivable 6,410
advertising expense 14,500
buildings 60,000
capital stock 50,000
cash 15,230
concessions revenue 60,300
cost of concessions sold 23,450
dividends paid during the month 8,400
furniture and fixtures $34,000
land 26,000
notes payable 20,000
projection equipment 25,000
rent expense-movies 50,600
retained earnings 73,780
salaries and wages expense 46,490
ticket sales 95,100
water, gas, and electricity 6,700

Required
1.Prepare an income statement for the month ended September 30, 2010.
2.Prepare a statement of retained earnings for the month ended September 30, 2010.
3.Prepare a balance sheet at September 30, 2010.
4.You have $1,000 to invest. On the basis of the statements you prepared, would
you use it to buy stock in Maple Park? Explain. What other information would you want before making a final decision?

Explanation / Answer

Placement of each account should be as follows. Note IS = Income Statement; BS = Balance Sheet. Accounts payable $17,600 (BS-Current Liabilities) Accounts Receivable $6,410 (BS-Current Assets) Advertising Expense $14,500 (IS-Expenses) Buildings $60,000 (BS-Long term assets) Capital Stock $50,000 (BS-Stockholder's equity) Cash $15,230 (BS-Current Assets) Concessions Revenue $60,300 (IS-Revenues) Cost of concessions sold $23,450 (IS-Expenses) Dividends paid during the month $8,400 (BS- Subtract from Stockholder's Equity) Furniture and fixtures $34,000 (BS-Long term assets) Land $26,000 (BS-Long term assets) Notes payable $20,000 (BS-Long term liabilities) Projection Equipment $25,000 (BS-long term assets) Rent expense - movies $50,600 (IS-Expenses) Retained Earnings $73,780 (BS-Stockholder's Equity) Salaries and wages expense $46,490 (IS-Expenses) Ticket Sales $95,100 (IS-Revenues) Water, gas and electricity $6,700 (IS-Expenses) Do your income statement first. You should have a net income of $13,600. Add this to retained earnings. If you add up all the stockholder's equity (making sure to add the net income and subtract the dividends paid) the amount should equal $129,040. Add this amount to total liabilities and the amount should be $166,640, which is the same as total assets.

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