As an alternative to a summer job paying $6 per hour between her junior and seni

Question

As an alternative to a summer job paying $6 per hour between her junior and senior years in college, Lori hart accepted an opportunity to lease and operate the tennis court concession in a local city recreational complex during June, July and august, 1993. Although she kept no accounting records, Lori was careful to handle all funds related to the tennis concession through a special bank account opened for that purpose.

An analysis of those deposits slips and check stubs for the three months is summarized below.

Receipts:

Hart's investment of personal funds $1,400

Court rental fees 7,375

Tennis lesson fess   1,975

Tennis lesson fees received in advance     150

  Proceeds of short-term loan from bank    900

         Total receipts   $11,800

Disbursements:

Purchase of ball-throwing machine                                                           140

Supplies Purchased      960

Utilities                                                                                                             175

Lease payments to city                                                                                    990

Wages to part-time assistant   1,500

Liability insurance premiums                                                                          210

Repayments of bank loan, including interest                                               920

Withdrawals of cash for personal expenses                                                 750

  Total disbursements                          $5645

  Cash balance, August 31, 1993 $6155

Lori confides in you, a personal friend who happens to be studying accounting, that she is pleased with her apparent profit of $6,155 for the summer. Eager to practice your newly acquired skills, you offer to review her records and prepare an income statement for the three months and a classified balance sheet at the end of August. In discussion with Lori, you learn that:

a.     Some tennis lessons, Paid for in advance, could not be scheduled during the summer. Lori plans to refund these fees, which total $150.

b.    Repayments to the bank included $ 250 of interest expense on the loan.

c.     Rental receipts include all revenue earned except for $500 due from a company that rented the entire set of courts for a weekend late in
August.

d.    A ball-throwing machine, purchased used, turned out to be quite temperamental. With a complete breakdown shortly after it was purchased, it was junked. (Note: Debit Equipment Loss)

e.    Supplies consisted of cans of tennis balls. Lori gave away a free can of tennis balls for each five hours of court time rented by an individual. Supplies amounting to $ 120 were on hand at August 31; these may be returned for a full refund. Lori estimates that each month during the summer, she took home $15 worth of supplies for personal use.

f.      All lease payments due the city were paid except for the final amount of $180.

g.    Lori estimates that the utility bill for August, when received, will be $100.

h.     The insurance premiums represent coverage for the months of June, July and August.

Required

Prepare financial statements for Lori

Explanation / Answer

The journal entries for each of the transactions are below:

Hart investment of personal funds$1,400
Cash Dr 1,400

Capital, Hart Cr 1,400

( This is the entry for business to start, the money invested goes to Capital of the owner)

Court rental fees $7,375

Cash Dr 7,375

Court Rental Fee Cr 7,375

( This is income of the firm)

Tennis Lesson fees $1,975

Cash Dr 1,975

Tennis Lesson Fees Cr 1,975

(This is income of the firm)
Tennis Lesson fees received in advance $150

Cash Dr 150

Unearned Fees Cr 150

( Fees received in advance is unearned and is a current liability)

Proceeds of short-term loan from bank $900

Cash Dr 900

Bank Loan Cr 900
Total receipts $11,800
Disbursements:
Purchase of ball-throwing machine $140

Ball Throwing Machine Dr 140

Cash Cr 140

(The machine would be a fixed asset)
Supplies Purchased $960

Supplies Dr 960

Cash Cr 960

Utilities $178

Utilities Expense Dr 178

Cash Cr 178
Lease payments to city $990

Lease Expense Dr 990

Cash Cr 990

wages to part-time assistant $1,500

Wages Expense Dr 1,500

Cash Cr 1,500

Liability insurance premiums $210

Prepaid Insurance Dr 210

Cash Cr 210

(Insurance premiums are paid in advance, so it is prepaid)

Repayment of bank loan, including interest $920

Bank Loan Dr 900

Interest Expense Dr 20

Cash Cr 920
Withdrawls of cash for personal expenses $750

Drawings, Hart Dr 750

Cash Cr 750

Total Disbursements $5,645
Cash Balance, August 31, 1993 $6,155

Let me know if you need anything more.

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