Prepare an Income Statement and a Statement of Retained Earnings

question 3

Essay

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.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.

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Definitions:

Normal Good

A type of good for which demand increases as the income of the consumer increases, showing a positive relationship between income and demand.

Demand Function

A mathematical formula that describes the relationship between the quantity of a good or service demanded and its price, along with other factors like income and the prices of related goods.

Substitution Effect

The effect observed when consumers replace more expensive items with cheaper alternatives due to changes in relative price levels, affecting demand for goods.

Utility Function

Describes how different combinations of goods or services (or different outcomes) provide levels of satisfaction or utility to an individual.