Spring Creek Realty Inc., organized July 1, 2004, is operated by Bob Gibbs. How many errors can you find in the following financial statements for Spring Creek Realty Inc., prepared after its first month of operations? Spring Creek Realty Inc.

Income Statement

July 31, 2004

Sales commissions

 

$46,100

Operating expenses

 

 

Office salaries expense

$8,150

 

Rent expense

3,800

 

Automobile expense

1,750

 

Dividends

1,000

 

Miscellaneous expense

775

 

Total operating expenses

 

15,475

Net income

 

$20,625

 

Bob Gibbs

Retained Earnings Statement

July 31, 2003

Net income for the month

$20,625

Retained earnings, July 31, 2004

$20,625

  Balance Sheet Inc.

For the Month Ended July 31, 2004

Assets

 

 

Cash

 

$30,425

Notes payable

 

10,000

Total assets

 

$40,425

Liabilities

 

 

Land

 

$20,200

Stockholders’ Equity

 

 

Capital stock

$10,000

 

Retained earnings

20,625

30,625

Total liabilities and stockholders’ equity

 

$50,825

  Spring Creek Realty Inc.

Statement of Cash Flows

July 31, 2004

Cash flows from operating activities:

 

Cash receipts from sales commissions

$ 46,100

Cash flows from investing activities:

 

Cash payments for land

(20,200)

Cash flows from financing activities:

 

Cash receipts from retained earnings

40,625

Net increase in cash during July

$ 66,525

Cash as of July 1, 2004

0

Cash as of July 31, 2004

$ 66,525