Betsy and Bill Kite, local golf stars, opened Parmor Driving range on March 1, 1998 , by investing \(\$ 10,000\) of their cash savings in the business. A caddy shack was constructed for cash at a cost of \(\$ 4,000\), and \(\$ 800\) was spent on golf balls and golf clubs. The Kites leased 5 acres of land at a cost of \(\$ 1,000\) per month and paid the first month's rent. During the first month, advertising costs totaled \(\$ 750\), of which \(\$ 150\) was unpaid at March 31 , and \(\$ 400\) was paid to members of the high school golf team for retrieving golf balls. All fees from customers were deposited in the company's bank account. On March 15, a dividend of \(\$ 800\) in cash was paid. A \(\$ 100\) utility bill was received on March 31 but it was not paid. On March 31 the balance in the company's bank account was \(\$ 8,550\). Betsy and Bill thought they had a pretty good first month of operations. However, their estimates of profitability ranged from a loss of \(\$ 1,450\) to net income of \(\$ 3,100\).

\section*{Instructions}

(a) How could the Kites have concluded that the business operated at a loss of \(\$ 1,450\) ?

Was this a valid basis on which to determine net income?

(b) How could the Kites have concluded that the business operated at a net income of \(\$ 3,100\) ? [Hint: Prepare a balance sheet at March 31.] Was this a valid basis on which to determine net income?

(c) Without preparing an income statement, determine the actual net income for March.

(d) What were the fees earned in March?