During the summer between his junior and senior years James

During the summer between his junior and senior years, James Cook needed to earn sufficient money for the coming academic year. Unable to obtain a job with a reasonable salary, he decided to try the lawn care business for three months. After a survey of the market potential, James bought a used pickup truck on June 1 for $1,230. On each door he painted \"James Cook Lawn Service, Phone 471-4487.\" He also spent $820 for mowers, trimmers, and tools. To acquire these items, he borrowed $2,720 cash by signing a note payable promising to pay the $2,720 plus interest of $75 at the end of the three months (ending August 31). By the end of the summer, James had done a lot of work and his bank account looked good. This prompted him to wonder how much profit the business had earned A review of the check stubs showed the following: Bank deposits of collections from customers totaled $12,400. The tollowing checks had been written: gas, oil, and lubrication, $1,040; pickup repairs, $440, mower repair, $120, miscellaneous supplies used, $250; helpers, $5,800, payroll taxes, $360; payment for assistance in preparing payroll tax forms, $35, insurance, $195, telephone, $150: and $2,795 to pay off the note including interest (on August 31). A notebook kept in the pickup. plus some unpaid bills, reflected that customers still owed him $810 for lawn services rendered and that he owed $220 for gas and oil (credit card charges). He estimated that the cost for use of the truck and the other equipment (called depreciation) for three months amounted to $770. Required 1. Prepare a quarterly income statement for James Cook Lawn Service for the months June, July and August. Assume that the company will not be subject to income tax. JAMES COOK LAWN SERVICE Income Statement Revenues Total revenues Expenses Total expenses

Solution

Income statement

For 3 month ended August xxxx

Income statement For 3 month ended August xxxx
Revenue
Lawn service revenue [12400+810]	13210
Total service revenue		13210
Expenses
Gas,oil and lubrication [1040+220]	1260
Pickup repairs	440
Mower repairs	120
Miscellaneous supplies used	250
Helpers	5800
Payroll taxes	360
payroll forms	35
Insurance expense	195
Telephone expense	150
Interest expense	75
Depreciation expense	770
Total expense		9455
Net Income		3755