Matt Trozo formed a lawn service company as a summer job. To start the business on May 1, he deposited $2,500 in a new bank account in the name of Trozzo Lawn Service, Inc. consisting of a $1,500 loan from his father and $1,000 of his own money. The corporation issued 100 shares of common stock to Trozo.
He rented lawn equipment, purchased supplies, and hired high school students to mow and trim customers’ lawns. At the end of each month, Trozo mailed bills to his customers. On August 31, Trozo was ready to dissolve the business and return to Regal University for the fall semester. Because he had been so busy, he had kept few records other than his checkbook and a list of amounts owed by customers.
At August 31, Trozo’s checkbook shows a balance of $2,640, and his customers still owe him $600. During the summer, he collected $5,600 from customers. His checkbook lists payments for supplies totaling $400, and he still has gasoline, weedeater cord, and other supplies that cost a total of $50. He paid his employees wages of $1,900, and he still owes them $200 for the final week of the summer.
Trozo rented some equipment from Ludwig Tool Company. On May 1, he signed a six-month lease on mowers and paid $600 for the full lease period. Ludwig will refund the unused portion of the prepayment if the equipment is in good shape. To get the refund, Trozo has kept the mowers in excellent condition. In fact, he had to pay $300 to repair a mower that ran over a hidden tree stump.
To transport employees and equipment to jobs, Trozo used a trailer that he bought for $300. He figures that the summer’s work used up one-third of the trailer’s service potential. Th e business checkbook lists an expenditure of $460 for dividends paid to Trozo during the summer. Also, Trozo paid his father back during the summer.

Requirements
1. Prepare the income statement of Trozo Lawn Service, Inc., for the four months May through August. The business is not subject to income tax.
2. Prepare the classified balance sheet of Trozo Lawn Service, Inc., at August 31.
3. Prepare a simple cash flow statement, showing cash flows from the following 3 areas:
a. Operations: Collections from customers, less payments for supplies, wages, rent, and repairs (show each separately)
b. Investing activities: purchase of trailer
c. Financing activities: borrowing from father, issuance of stock, repayment of loan, and payment of dividends
d. Payments for supplies, wages, rent, and repairs
4. Evalute Matt Trozo’s profitability, liquidity, and cash flows for the summer. Would you say he was successful in his lawn business? Why or why not?