On October l, 2016, Hilda Petrochuck opened Hilda's Coffee Shop, Inc. Petrochuck is now at a crossroads. The October financial statements paint a glowing picture of the business, and Petrochuck has asked you whether she should expand the business. To expand the business, Petrochuck wants to be earning net income of $10,000 per month and have total assets of $50,000. Petrochuck believes she is meeting both goals.
To start the business, Petrochuck invested $25,000, not the $15,000 amount reported as "Common stock" on the balance sheet. The business issued $25,000 of common stock to Petrochuck. The bookkeeper "plugged" the $15,000 "Common stock" amount into the balance sheet (entered the amount necessary without any support) to make it balance. The bookkeeper made some other errors, too. Petrochuck shows you the following financial statements that the bookkeeper prepared:

Requirement
1. Prepare corrected financial statements for Hilda's Coffee Shop, Inc.: single-step Income Statement, Statement of Retained Earnings, and Balance Sheet. Then, based on Petrochuck's goals and your corrected statements, recommend to Petrochuck whether she should expand the restaurant.

Transcribed Image Text:

Hilda's Coffee Shop Income Statement Month ended October 31, 2016 Revenue: Investments by owner $25,000 3,000 $28,000 Expenses: $5 Wages expense Rent expense Dividends Depreciation expense fixtures 4,000 3,000 1000 13.000 15,000 Net income Hilda's Coffee Shop Balance Sheet October 31, 2016 Assets Liabilities $7,000 32,000 Cash Prepaid insurance Insurance expense Food inventory Cost of goods sold (expense) Fixtures (tables, chairs, etc.) Dishes and silverware 8,000 Accounts payable 1,000 Sales revenue 1000 Accumulated depreciation 5.000 fixtures 12,000 24,000 Stockholders' Equity 1000 15,000