Financial Statement of the Lemo Company

Lemo’s Business Activities

Year One:

• Borrowed $100 from grandmother for one year at 5% interest
• Issued 100 shares of stock and sold 50 shares to Tom for $50. Fifty remaining shares issued to the entrepreneur at no cost
• Sales of Lemo totaled $500
• Materials & Labor Costs were $250 (Materials $150 and Labor $100)
• Lemo made a $250 profit
• Paid $20 dividend
• Retained earnings were $230 ($250 profit - $20 dividend)

Year Two:

• Sales increased to $545
• Paid back $100 to grandmother plus $5 in interest payments
• Materials and Labor Costs were $310 (Materials $200 and Labor $110)
• Bought $50 in equipment
• Took $5 in depreciation ($50 over 10 years)
• Earned $11 interest from the bank (3% of $380)
• Lemo made a $341 profit
• Paid $20 dividend
• Retained earnings were $551 ($230 from first year + $341 this year - $20 dividend)

 Financial Statement of the Lemo Company

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