Maintenance and Repairs Expense ……… 350 — May Nimbus Flying School company that provides lessons was started with investment

On May 1, Nimbus Flying School, a company that provides flying lessons, was started with an investment of $45,000 cash in the business. Following are the assets and liabilities of the company on May 31, 2015, and the revenues and expenses for the month of May.

Cash ……………………………………… $ 4,650

Accounts Receivable …………………….. 7,400

Equipment ……………………………….. 64,000

Service Revenue …………………………. 6,800

Advertising Expense …………………….. 500

Accounts Payable ……………………….. 1,400

Notes Payable …………………………… $28,000

Rent Expense ……………………………. 900

Maintenance and Repairs Expense ……… 350

Gasoline Expense ……………………….. 2,500

Utilities Expense ………………………… 400

No additional investments were made in May, but the company paid dividends of $500 during the month.

Instructions

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

(b) Prepare an income statement and a retained earnings statement for May assuming the following data are not included above: (1) $900 worth of services were performed and billed but not collected at May 31, and (2) $1,500 of gasoline expense was incurred but not paid.

SOLUTION

(a) NIMBUS FLYING SCHOOL

Income Statement

For the Month Ended May 31, 2015

Revenues

Service revenue $6,800

Expenses

Gasoline expense $2,500

Rent expense 900

Advertising expense 500

Utilities expense 400

Maintenance and repairs expense 350

Total expenses 4,650

Net income $2,150

NIMBUS FLYING SCHOOL

Retained Earnings Statement

For the Month Ended May 31, 2015

Retained Earnings, May 1 $ 0