Howard Company A

Diane Howard made the following request of a friend: My bookkeeper has quit, and I need to see the balance sheets(Statement of Financial Position) of my company. He has left behind a book with the numbers already entered in it. Would you be willing to prepare balance sheets for me? Also, any comments you care to make about the numbers would be appreciated. The Cash account is healthy, which is a good sign, and he has told me that the net income in June was P19,635.

The book contained a detailed record of transactions, and from it the friend was able to copy off the balances at the beginning of the month and at the end of the month as shown in Exhibit 1. Diane Howard owned all the stock of Howard Company. At the end of June, Diane Howard paid herself an P11,700 dividend and used the money to repay her loan from the company. Questions

1. Prepare balance sheets (Statement of Financial Position) as of June 1 and as of June 30, in proper format.

2. Make comments about how the financial condition as of the end of June compared with that at the beginning of June.

3. Why do retained earnings not increase by the amount of June net Income?

4. As of June 30, do you feel that Howard Company is worth the amount in Shareholders Equity, P619,446 Explain.

Exhibit 1 Account Balances Accounts payable Accounts receivable Accrued wages payable Accumulated depreciation on building Accumulated depreciation on equipment Bank notes payable Building Capital Stock Equipment (at cost) Land Merchandise inventory Note receivable, Diane Howard Other noncurrent assets Other noncurrent liabilities Prepaid insurance Retained Earnings Supplies on hand Taxes payable June 1 P8,517 21,798 156,000 5,304 585,000 390,000 34,983 89,700 29,835 11,700 4,857 5,700 June 30 P21,315 26,505 157,950 29,250 585,000 390,000 66,660 36,660 89,700 229,446 6,630 7,224