Shaw’s Garden was started on May 1 with an investment of $45,000 cash. Following are the assets, liabilities,

Shaw’s Garden was started on May 1 with an investment of $45,000 cash. Following are the assets, liabilities, and common stock of the company on May 31, 2014, and the revenues and expenses for the month of May, its first month of operations.

Accounts receivable  $ 8,400                     Notes payable                      $26,000

Service revenue         10,400                      Salaries and wages expense    1,900

Advertising expense    1,800                      Equipment                            58,800

Accounts payable       4,400                      Maintenance and repairs expense    2,100

Cash                       10,800                       Insurance expense                        400

Common stock        45,000

No additional common stock was issued in May, but a dividend of $1,600 in cash was paid.

Requirements:

A.  Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2014.

B.  Briefly discuss whether the company’s first month of operations was a success.

C.  Discuss the company’s decision to distribute a dividend.