Question

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, 2017 (with the exception of retained earnings, which is the balance on September 1, 2017), and the amounts shown for income statement items are balances for the month ended September 30, 2017.

Accounts payable	$17,910		Furniture and fixtures	$33,000
Accounts receivable	6,490		Land	26,300
Advertising expense	14,380		Notes payable	20,000
Buildings	56,500		Projection equipment	25,900
Capital stock	53,000		Rent expense—movies	50,810
Cash	15,020		Retained earnings	65,820
Concessions revenue	60,390		Salaries and wages expense	46,990
Cost of concessions sold	23,650		Ticket sales	96,940
Dividends paid during the month	8,200		Water, gas, and electricity	6,820

1. Using the data given, prepare an income statement for the month ended September 30, 2017.

Maple Park Theatres Corp.
Income Statement
For the Month ended September 30, 2017
Revenues:
Ticket sales	$
Concessions revenue
Total revenues		$
Expenses:
Rent expense-movies	$
Cost of concessions sold
Advertising expense
Salaries and wages expense
Water, gas, and electricity
Total expenses
Net loss		$

Feedback

1) Revenue represents income received from normal business activities. Two items should be listed on the inside column and a subtotal in the right column.
2) Expenses represent all of the various costs necessary to generate revenue. Five items are listed on the inside column and a subtotal in the right column.

2. Using the data given, prepare a statement of retained earnings for the month ended September 30, 2017.

Maple Park Theatres Corp.
Statement of Retained Earnings
For the Month ended September 30, 2017
Retained earnings, beginning balance, September 1, 2017	$
Net income for September
Dividends for September
Retained earnings, ending balance, September 30, 2017	$

Feedback

The retained earnings statement summarizes the income earned and dividends paid over the life of a business. Retained earnings represents the accumulated earnings of a corporation less the amounts paid in dividends to stockholders. Dividends are distributions of the net income, or profits, of a business to its stockholders.

3. Using the data given, prepare a balance sheet at September 30, 2017.

Maple Park Theatres Corp.
Balance Sheet
September 30, 2017
Assets
Cash	$
Accounts receivable
Land
Buildings
Furniture and fixtures
Concessions revenue
Total assets	$
Liabilities and stockholders' equity
Accounts payable	$
Notes payable
Capital stock
Ticket sales
Total liabilities and stockholders' equity	$

Feedback

1) List all assets under the Asset column. Assets are economic resources of the business.
2) List all liabilities, then stockholders' equity accounts. Liabilities are creditors' claims on the business assets. Capital stock and retained earnings make up stockholders' equity.
3) The retained earnings account balance listed is the beginning balance. Use the retained earnings end-of-month balance determined from the Retained Earnings Statement.
4) Assets = Liabilities + Stockholders' Equity.

4. You have $1,000 to invest. You want to use it to buy stock in Maple Park? Which of the following information would you least consider before making a final decision?

1.	Whether the company is operating at a profit?
2.	The amount of dividends paid by the company.
3.	The amount of salaries the company pays.
4.	Current market price of the stock.

Answer 1

Answers

• Requirement 1

Maple Park Theatres Corp.
Income Statement
For the Month ended September 30, 2017
Revenues:
Ticket sales	$96,940
Concessions revenue	$60,390
Total revenues		$157,330
Expenses:
Rent expense-movies	$50,810
Cost of concessions sold	$23,650
Advertising expense	$14,380
Salaries and wages expense	$46,990
Water, gas, and electricity	$6,820
Total expenses		$142,650
Net Income		$14,680

• Requirement 2

Maple Park Theatres Corp.
Statement of Retained Earnings
For the Month ended September 30, 2017
Retained earnings, beginning balance, September 1, 2017	$65,820
Net income for September	$14,680
Dividends for September	($8,200)
Retained earnings, ending balance, September 30, 2017	$72,300

• Requirement 3

Maple Park Theatres Corp.
Balance Sheet
September 30, 2017
Assets
Cash	$15,020
Accounts receivable	$6,490
Land	$26,300
Buildings	$56,500
Furniture and fixtures	$33,000
Projection Equipment	$25,900
Total assets	$163,210
Liabilities and stockholders' equity
Accounts payable	$17,910
Notes payable	$20,000
Capital stock	$53,000
Retained Earnings	$72,300
Total liabilities and stockholders' equity	$163,210

• Requirement 4

The correct answer is Option #3 I’d be least bothered by the amount of salaries that company pays if I’m thinking of investing in Maple Park.

This is because I would be interested in profit and income that the business is generating if I’m thinking of investing because my return on investment depends on THAT. How much the company pays to employees is the LEAST of my concern for investment decision purposes.