Andrew Poist works for Nilakanta and Company, a public accounting firm in Florence, South Carolina. On October 4, 2000, Sydney Langston, who started selling decorative, carved-wood duck decoys out of a booth at Cypress Court Mall 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 | retired, | decided | needed something to help keep me busy. | started this little business, “The Woodshed,” a month ago. It is open only on Fridays when the mall has its Craft Day. | leased the booth for one year. So, every Friday until September |, 2001, | will display my ducks in the booth and sell them.

| know | should have come to see you before | got started. | just kept putting it off. So, here’s what | did. Throughout the month of September | tossed everything having to do with the Woodshed’s finances into this box. It has all kinds of documents in it. | have all of my bank deposits for the month, checks | wrote that were paid by my bank, the receipts for the woodworking supplies | bought the day | started, etc. | sorted out some items, like checks | wrote to the grocery store and the electric company. Anyway, it’s the first part of October, and | can’t figure out how well the Woodshed did in September. Can you?”

“Of course | 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 checking account. They total $2,200. Andrew notices that on four of the deposit slips, Mr. Langston wrote “Craft Sales.” Each one of the deposit dates corresponds to each of the four Fridays in September. On the other deposit slip, which is for $1,300, Mr. Langston wrote “Social Security.”

(b) Six canceled checks from Mr. Langston’s checking account. They total $3,350. Four checks written to Miranda’s Woodworking Supplies Company total $600. One check for $350 was written to Circuit City, and one check for $2,400 was written to Cypress Court Mall Management.

(c) A handwritten schedule that reads as follows:

Mallard $ 60 = sold Grey Goose $100 sold Baby Duck $ 40 sold Swan $200 Donald Duck $ 70 sold Large Mallard $130 sold Required: (1) Using the information Mr. Langston supplied to Andrew, calculate your best estimate of the revenues, expenses, and net income for the Woodshed for September 2000.

(2) 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?  lo7