Refer to PB1-3.

Required:

1. Did Cheese Factory’s cash balance increase or decrease during the year ended August 31, 2018? Which financial statement shows the reasons for this change?
2. What would Cheese Factory’s 2018 net income have been had it given a 5 percent pay increase to all employees on September 1, 2017? Which financial statement did you use to answer this?

Data From PB1-3

Cheese Factory Incorporated reported the following information for the fiscal year ended August 31, 2018.

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Accounts Payable $145,000 Office Expenses 95,000 Accounts Receivable 15,000 Prepaid Rent 50,000 Cash (balance on September 1, 2017) 75,000 Retained Earnings (beginning) 410,000 Cash (balance on August 31, 2018) 80,000 Salaries and Wages Expense 955,000 Common Stock 100,000 Salaries and Wages Payable 170,000 Dividends 10,000 Sales Revenue 1,660,000 Equipment 755,000 Supplies 25,000 Notes Payable 30,000 Utilities Expense 530,000