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Maynard Case a and B

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ASSIGNMENT in FINANCIAL ACCOUNTING Case 2-1: MAYNARD COMPANY (A)* 1. Prepare balance sheets 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.  In terms of retained earnings, the financial condition of Maynard Company as of June 30 is healthy at $229,446 which has increased from $221,511 as of June 1. Although the current ratio



on June 30 at 2.15 is lower than the current ratio on June 1 at 4.35, this is still considered healthy as acceptable current ratio is within 1 – 2 range. As of June 30, total assets increased by $43,350 as compared to June 1, which may mostly be explained by the following: o Cash increased by $31,677 as of June 30. o Accounts receivable increased by $4,707 as of June 30. These may be sales made on credit. o Supplies-on-hand increased by $1,071. More supplies may have been purchased for this month. o Purchase of an asset - new equipment (increased by $23,400). o More sales for the month (as explained by the increase in cash and accounts receivable and the decrease in merchandise inventory). o Most purchases were done on credit as observed from the increase in accounts payable. o Current liabilities (accounts payable, bank notes payable, accrued wages payable and taxes payable) have increased at the end of the month, which means cash may not have been yet used to pay for these.

3. Why do retained earnings not increase by the amount of June net income?  The declared June net income of $19,635 does not equal to the increase in the retained earnings ($229,446 - $221,511 = $7,935) because the dividend of $11,700 was already withdrawn by Diane Maynard to repay her loan (note receivable) from the company. 4. As of June 30, do you feel that Maynard Company is worth the amount in Shareholder’s Equity, $616,446? Explain. 

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