Posted: April 24th, 2016

What other information would you want before making a final decision?

Problem 1-2: Users of Accounting Information and Their Needs

Havre Company would like to buy a building and equipment to produce a new product line. Information about Havre is more useful to some people involved in the project than to others.

Complete the following chart by identifying the information listed with the user’s need to know the information. Identify the information as one of the following: a. Need to know, b. Helpful to know, or c. Not necessary to know.

1. Amount of current debt, repayment schedule, and interest rate
2. Fair market value of the building
3. Condition of the roof and heating and cooling, electrical, and plumbing systems
4. Total cost of the building, improvements, and equipment to set up production
5. Expected sales from the new product, variable production costs, and related selling costs.

Problem 1-5: Income Statement, Statement of Retained Earnings, and Balance Sheet

P1-5

The following list, in alphabetical order, shows the various items that regularly appear on the financial statements of Maple Park Theatres Corp. The amounts shown for balance sheet items are balances as of September 30, 2012 (with the exception of retained earnings, which is the balance on September 1, 2012); and the amounts shown for income statement items are balances for the month ended September 30, 2012.

Accounts payable $17,600
Accounts receivable 6,410
Advertising expense 14,500
Buildings 60,000
Capital stock 50,000
Cash 15,230
Concessions revenue 60,300
Cost of concessions sold 23,450
Dividends paid during the month 8,400
Furniture and fixtures 34,000
Land 26,000
Notes payable 20,000
Projection equipment 25,000
Rent expense�”movies 50,600
Retained earnings 73,780
Salaries and wages expense 46,490
Ticket sales 95,100
Water, gas, and electricity 6,700

1. Prepare an income statement for the month ended September 30, 2012.
2. Prepare a statement of retained earnings for the month ended September 30, 2012.
3. Prepare a balance sheet at September 30, 2012.
4. You have $1,000 to invest. On the basis of the statements you prepared, would you use it to buy stock in Maple Park? Explain. What other information would you want before making a final decision?