Requirements: 1. What is the income statement and the statement of owner’s equit

Question

Requirements:

1. What is the income statement and the statement of owner’s equity of Wintz Lawn Service for the four months May 1 through August 31, 2018.

2. What is the classified balance sheet (report form) of Wintz Lawn Service for August 31, 2018.

3. Was Wintz’s summer work successful? Why?

Team Project 4-1 Kat hy Wintz formed a lawn service business as a summer job. To start the business on May 1, 2018, she deposited $1,000 in a new bank account in the name of the business. The $1,000 consisted of a $600 loan from Bank One to her company Wintz Lawn Service, and $400 of her own money. The company issued $400 of capital to Wintz. Wintz rented lawn equipment, purchased supplies, and hired other students to mow and trim customers' lawns. At the end of each month, Wintz mailed bills to the customers. On August 31, she was ready to dissolve the business and return to college. Because she was so busy, she kept few records other than the cherkbook and a list of receivables from customers. At August 31, the business's checkbook shows a balance of $2,000, and customers still owe $750. During the summer, the business collected $5,500 from customers. The business checkbook lists payments for supplies totaling $400, and it still has gasoline, weed trimmer cord, and other supplies that cost a total of $50. The business paid employees $1,800 and still owes them $300 for the final week o the summer. Wintz rented some equipment from Ludwig's Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid $600 for the full rental period in advance. Ludwig's will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Wintz has kept the mowers in excellent condition. In fact, the business had to pay $300 to repair a mower that the To transport employees and equipment to jobs, Wintz used a trailer business bought for $300. The business estimates that the summer's work used up one-third of the trailer's service potential. The business checkbook lists a payment of $500 for cash withdrawals paid during the summer. The business paid the loan back during August. (For simplicity, ignore any interest expense associated with the loan.)

Explanation / Answer

1. Income statement

Depreciation

Owners equity: 2800

Share capital: 400

Retained earnings: 2400

2.

3. Wintz summer work has been successful as she has made a profit of 2400 i.e a return of almost 600% on her invested capital of 400

Sales         6,250 Manufacturing expense          (450) Gross profit         5,800 Employee cost      (2,100) Repair          (300) Lease          (400) Other expenses          (500) Operating profit         2,500

Depreciation

         (100) Profit before interest and tax         2,400

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