Special Delivery was started on May 1 with an investment of $45,000 cash. To

‘jump start” its sales, the company spent significant money on advertising. Following are the assets and liabilities of the company on May 31, 2007, and the revenues and expenses for the month of May, its first month of operations.

Accounts receivable $ 6,200 Notes payable $30,000 Service revenue 10,800 Wage expense 2,200 Advertising expense 800 Equipment 60,300 Accounts payable 2,400 Repair expense 500 Cash 13,700 Fuel expense 2,400 Insurance expense 400 No additional common stock was issued in May, but a dividend of $1,700 in cash was paid.

Instructions

(a) Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2007.

(b) Briefly discuss whether the company’s first month of operations was a success.

(c) Discuss the company’s decision to distribute a dividend.