Lucy and Nick Lars, local golf stars, opened the Chip-Shot Driving Range on March 1 , 2005, by investing $20,000 of their cash savings in the business. A caddy shack was constructed for cash at a cost of $6,000. and $800 was spent on golf balls and golf clubs. The Lars leased five 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 revenues from customers were deposited in the company's bank account. On March 15. Lucy and Nick received a dividend of $800 in cash. A $100 utility bill was received on March 31 but was not paid. On March 31. the balance in the company's bank account was $15,100.

1 ue\ and Nick thought they had a pretty zood first month of operations. But, their estimates ol profitability ranged from a loss of $4.W0 to net income of $1,650.

Instructions With the class divided into groups, answer the following.

(a) How could the Lars have concluded that the business operated at a loss of $4,900? Was this a valid basis on which to determine net income?

(b) How could the Lars have concluded that the business operated at a net income of $1,650?
{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 was the revenue earned in March?