The financial statements for Wichita Riding Club, Inc., follow.

REQUIRED

1. Explain how the four statements for Wichita Riding Club are related to each other.

2. Which statements are most closely associated with the goals of liquidity and profitability? Why?

3. If you were the owner of this business, how would you evaluate the company’s performance? Give specific examples.

4. If you were a banker considering Wichita Riding Club for a loan, why might you want the company to get an audit by an independent CPA? What would the audit tellyou?

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Wichita Riding Club, Inc. Income Statement For the Month Ended November 30, 2011 Revenues Riding lesson revenue $4,650 Locker rental revenue 1,275 Total revenues $5,925 Expenses Salaries expense $1,125 Feed expense Utilities expense Total expenses 750 450 2,325 Income before income taxes $3,600 Income taxes expense 600 Net income $3,000 Wichita Riding Club, Inc. Statement of Retained Earnings For the Month Ended November 30, 2011 Retained earnings, October 31, 2011 $5,475 Net income for the month 3,000 $8,475 2,400 Subtotal Less dividends Retained earnings, November 30, 2011 $6,075 Wichita Riding Club, Inc. Balance Sheet November 30, 2011 Liabilities Assets $ 6,525 Cash Accounts receivable Accounts payable $13,350 900 Stockholders' Equity Supplies 750 Land Common stock $34,500 15,750 Retained earnings Total stockholders'equity Building 22,500 6,075 Horses 7,500 40,575 Total liabilities and stockholders' equity Total assets $53,925 $53,925