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46 Part 1 Financial Accounting

Case 2-
Cases
Music
Case 2-1
On a shee
Maynard Company (A)* of Music l
tion descr
Diane Maynard made the following request of a owned all the stock of Maynard Company. At the end erable spa
friend: of June, Diane Maynard paid herself an $ I I ,700 divi- any, of thr
dend and used the money to repay her loan from the ther by re''
My bookkeeper has quit, and I need to see the balance
company. erase) or
sheets of my company. He has left behind a book with
the numbers already entered in it. Would you be will- one of the

ing to prspare balance sheets for me? Also, any com- Questions The basic
ments you care to make about the numbers would be equity, rnr
appreciated. The Cash account is healthy, which is a 1. Prepare balance sheets as of June 1 and as of June minimizer
good sign, and he has told me that the net income in 30, in proper format sheet iter
June was $ 19,635. 2. Make comments about how the financial condition amount (l
The book contained & detailed record of transac- as of the end of June compared with that at the be- After y
tions, and from it the friend was able to copy off the ginning of June. ance sheet
balances at the beginning of the month and at the end 3. Why do retained earnings not increase by the actions o(
of the month as shown in Exhibit 1. Diane Maynard amount of June net income? other tranr
4. As of June 30, do you feel that Maynard Company 1. The sr

is worth the amount in Shareholder's Equiry lnvenl


* O Professor Robert N. Anthony, Harvard Business School.
$6 I g,446? Explain. 30 da.
2. Mercl
whict
3. Mercl
EXIIIBIT I Account Balances the c
30 da
fune 1 fune 30
Accounts payable $ 8,517 $ 21,31 5
Accounts receivable 21 ,798 26,505 * O Professc
Accrued wages payable 1,974 2,202
Accumulated depreciation on building 1 56,000 157,950
Accumulated depreciation on equipment 5,344 5,928
Bank notes payable 8,385 29,250
Building 585,000 585,000
Case 2-
Capital stock 390,000 390,000
34,983 66,660
Cash
Equipment (at cost) 13,260 36,664
Lone I
Land 89,700 89,700
On March
Merchandise inventory 29,835 26,520
ganized to
Note receivable, Diane Maynard 11,74O 0
4,857 5,265 under unui
Other noncurrent assets
Other noncurrent liabilities 2,451 2,451
Prepaid insurance 3,1 50 2,826
Retained earnings 221,511 229,446 * Based 0n i
Supplies on hand 5,559 6,630 of Oregon (,

Taxes payable 5,744 7,224 Harvard Bus