Doug Maltbee formed a lawn service business as a summer job. Tostart the business on May 1, he deposited $1,000 in a new bankaccount in the name of the proprietorship. The $1,000 consisted ofa $600 loan from his father and $400 of his own money. Doug rentedlawn equipment, purchased supplies, and hired fellow students tomow and trim his customer's lawns.
At the end of each month, Doug mailed bills to his customers. OnAugust 31, he was ready to dissolve the business and return toLouisiana State University for the fall semester. Because he was sobusy, he kept few records other than his checkbook and a list ofamounts owed to him by customers.
At August 31, Doug's checkbook shows a balance of $690, and hiscustomers still owe him $500. During the summer, he collected$4,250 from customers. His checkbook lists payments for suppliestotaling $400, and he still has gasoline, weedeater cord, and othersupplies that cost a total of $50. He paid his employees $1,900,and he still owes them $200 for the final week of the summer.
Doug rented some equipment from Scholes Machine Shop. On May 1,he signed a six-month lease on mowers and paid $600 for the fulllease period. Scholes will refund the unused potion of theprepayment if the equipment is in good shape. To get the refund,Doug has kept the mower in excellent condition. In fact, he had topay $300 to repair a mower.
To transport employees and equipment to jobs, Doug used atrailer that he bought for $300. He figures that the summer's workused up one-third of the trailer's service potential. The businesscheckbook lists a payment of $460 for cash withdrawals by Dougduring the summer. Doug paid his father back during August.
As a team, prepare the income statement of Maltbee Lawn Servicefor the four months May through August. Prepare the classifiedbalance sheet of Maltbee Lawn Service at August 31.