Andrew Poist works for a public accounting firm in Melbourne, Australia. On 4 October 20XI Sydney Langston, who started selling decorative, carved, wooden ducks out of a booth at Cypress Court shopping centre during the first week in September, comes to see Andrew for some accounting help.

Mr Langston walks into Andrew's office carrying a small cardboard box. He tells Andrew the following: 'After I retired, I decided I needed something to help keep me busy. I started this little business, The Woodshed, a month ago. It is open only on Fridays when the shopping centre has its Craft Market. I leased the booth for one year. So every Friday until 1 September 20X2, I will display my ducks in the booth and sell them.

'I know I should have come to see you before I got started, but I kept putting it off. So here's what I did. During September I tossed everything to do with The Woodshed's finances into this box. It has all kinds of documents in it. I have all of my bank deposits for the month, cheques I wrote that were paid by my bank, the receipts for the woodworking supplies I bought the day I started, and so on. I sorted out some items, like payments I made to the grocery shop and the electricity company. Anyway, it's the first part of October, and I can't figure out how well The Woodshed did in September. Can you?'

'Of course I can', replies Andrew. 'I'll have something for you in a couple of days.'

Mr Langston leaves, and Andrew opens the small box. Inside is a small pile of documents:

a Five deposit slips from Mr Langston's bank account. They total \(\$ 2300\). Andrew notices that on four of the deposit slips, Mr Langston wrote Craft Sales. Each of the deposit dates corresponds to each of the four Fridays in September. On the other deposit slip, which is for \(\$ 1300\), Mr Langston wrote Centrelink payment.

b Six cheques honoured by Mr Langston's bank account, totalling \(\$ 3350\). Four cheques written to Miranda's Woodworking Supplies, total \(\$ 600\). One cheque for \(\$ 350\) was written to Circuit City, and one cheque for \(\$ 2400\) was written to Cypress Court Shopping Centre management.

c A handwritten schedule that reads as follows:

Required:
i Using the information Mr Langston supplied to Andrew, calculate your best estimate of the revenues, expenses and net income for The Woodshed for September 20X1.
ii How could your calculations of revenues, expenses and net income be misstated? When Andrew meets with Mr Langston to discuss The Woodshed's operating results for September, what questions should he ask concerning the information Mr Langston supplied?

Transcribed Image Text:

Mallard Grey Goose Baby Duck Swan Donald Duck Large Mallard $ 60 $100 $ 40 $200 $ 70 $130 sold sold sold sold sold