Prepare an income statement and a statement of retained earnings for the month of May. Also, prepare a balance sheet as of May 31, 2017, for McGuire Corporation

Question

The financial transactions of McGuire Corporation for the month of May, their first month of operations, are as follows:
• On May 1, 2017, McGuire Corporation issued common stock in exchange for $20,000 cash from a stockholder, Deborah Merchant.
• On May 3, the corporation borrowed $5,000 from a creditor and executed a note payable with the principal and interest to be due in one year.
• On May 7, the corporation purchased $15,000 of equipment for cash.
• On May 8, McGuire Corporation rendered service to a client and earned $3,000 in cash.
• On May 12, the corporation incurred a repair expense of $1,800 and promised to pay the repair contractor the following month.
• On May 18, the corporation rendered service to a new client in the amount of $8,000 on account, as the client promised to pay the following month.
• At the end of May, McGuire Corporation distributed cash dividends of $1,500.

What will be an ideal response

Answer 1

McGuire Corporation
Income Statement
Month Ended May 31, 2017

Revenues:
Service Revenue $11,000
Expenses:
Repair Expense $1,800
Total Expenses 1,800
Net Income $ 9,200

McGuire Corporation
Statement of Retained Earnings
Month Ended May 31, 2017

Retained Earnings, May 1, 2017 $0
Net Income for the month 9,200
9,200
Dividends (1,500 )
Retained Earnings, May 31, 2017 $ 7,700

McGuire Corporation
Balance Sheet
May 31, 2017

Assets Liabilities
Cash $11,500 Accounts Payable $ 1,800
Accounts Receivable 8,000 Notes Payable 5,000
Equipment 15,000 Total Liabilities 6,800
Stockholders' Equity
Common Stock 20,000
Retained Earnings 7,700
_______ Total Stockholders' Equity 27,700
Total Assets $34,500 Total Liabilities and Stockholders' Equity $34,500

Note:
Calculation of cash balance, May 31, 2017:

Common stock issued $20,000
Borrowing from creditor 5,000
Service fees received 3,000
Receipts 28,000
Less payments:
Purchase of equipment (15,000 )
Dividends (1,500 )
Cash balance, May 31, 2017 $11,500