Prepare an Income Statement and a Statement of Owner's Equity

question 156

Essay

Prepare an income statement and a statement of owner's equity for the month of May.Also,prepare a balance sheet as of May 31,2017,for McGuire Company.The financial transactions of McGuire Company for the month of May,their first month of operations,are as follows:
• On May 1,2017,the owner,Thomas McGuire contributed $20,000 cash to establish the business.
• On May 3,the company 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 company purchased $15,000 of equipment for cash.
• On May 8,McGuire Company rendered service to a client and earned $3,000 in cash.
• On May 12,the company incurred a repair expense of $1,800 and promised to pay the repair contractor the following month.
• On May 18,the company 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 withdrew $1,500 from the business.

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Definitions:

Preferred Stock

A class of ownership in a corporation with a fixed dividend that has priority over common stock dividends but typically does not have voting rights.

Par Value

The nominal or face value of a bond, share, or coupon as stated by the issuer.

Market Price

The up-to-the-minute market price for assets or services open for buy or sell transactions.

Dividends

Funds distributed by a company to its shareholders from its profits.