Question 1:
Answer: Balance Sheets as of June 1 and June 30
Question 2: Make comments about how the financial condition as of the end of June 30 compared with that at the beginning of June.
Answer: The financial condition of the company as of the end of June 30 compared to that of June 1 is better in the view of the management. The company has increased its total assets to $ 43,350, this increase comes from short term borrowings and net earnings of the month. This shows that stockholders are making good use of credit in order to operate its business, while in the ...
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Question 2: Make comments about how the financial condition as of the end of June 30 compared with that at the beginning of June.
Answer: The financial condition of the company as of the end of June 30 compared to that of June 1 is better in the view of the management. The company has increased its total assets to $ 43,350, this increase comes from short term borrowings and net earnings of the month. This shows that stockholders are making good use of credit in order to operate its business, while in the view of creditors it is still good even though current ratio decreases by 2.20, since current assets can still pay current liabilities in full.
Question 3: Why do Retained Earnings not Increase by the amount of June net Income?
Answer: Retained Earnings is the accumulated profits of the company less paid dividends, In Maynard Company’s case, It earned a Net income of $19,635 at the end of June 30, supposedly its Retained earnings will have a balance of $241,146 , but since Diane Maynard paid herself a dividend amounting to $11,700 at the end of June that transaction decreases the Retained Earnings, and resulted to Retained Earnings Ending balance of $ 229,446.00.
Question 4: As of June 30, do you feel that Maynard Company is worth the amount in the Shareholder’s Equity, $ 619,446.00? Explain.
Answer: Yes, Maynard Company is worth its Shareholders Equity. Shareholders equity is composed of all stockholders’ investment and all profits the company made in its entire existence. It can also be expressed as Total Assets less all Liabilities, for this we can say that a company’s worth is its Stockholder’s Equity or also known as Net Worth.