Lily Kent purchased Pecan Grove, a mobile home park, last September 1, and she has operated it four months without keeping formal accounting records. However, she has deposited all receipts in the bank and has kept an accurate checkbook record of payments. An analysis of the cash receipts and payments follows.

Ms. Kent wants you to prepare an accrual basis income statement for the village for the four-month period she has operated the business, a statement of changes in owner's equity, and a December 31 balance sheet. You ascertain the following. (T-accounts may be helpful in organizing the data.)
The buildings and improvements were estimated to have a 25 -year remaining life when purchased and at the end of that time will be wrecked. It is estimated that the sale of salvaged materials will just pay the wrecking costs and the cost of clearing the site. The office equipment is in good condition. At the time of purchase, Ms. Kent estimated she would use the equipment for three years and would then trade it in on new equipment of like kind. She thought \(\$ 150\) a fair estimate of what she would receive for the old equipment when she traded it in at the end of three years.
The \(\$ 1,140\) payment for insurance was for a policy taken out on September 1. The policy's protection was for one year beginning on that date. Ms. Kent estimates that one third of the office supplies purchased have been used. She also says that the one employee of the park earns \(\$ 50\) per day for a five-day week that ends on Friday. The employee was paid last week but has worked four days December \(28-31\), for which he has not been paid.
Included in the \(\$ 19,380\) of mobile home rentals collected is \(\$ 360\) received from a tenant for three months' rent beginning on December 1. Also, a tenant has not paid his \(\$ 120\) rent for the month of December.
The long-term note payable requires an annual payment of \(12 \%\) interest on the beginning principal balance plus a \(\$ 6,000\) annual payment on the principal. The first payment is due next September 1. The property tax payment was for one year's taxes that were paid on October 1 for the tax year beginning on September 1, the day Ms. Kent purchased the business.

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Investment Purchased Pecan Grove: Office equipment 1,500 Receipts Payments $52,000 Buildings and improvements 90,000 Land. 105,000 Total $196,500 Less long-term note payable signed 145,000 Cash paid. Insurance premium paid $51,500 1,140 Office supplies purchased Wages paid. Utilities paid. 144 4,000 450 Property taxes paid 1,500 Owner's withdrawals of cash 4,800 Mobile home space rentals collected. 19.380 Totals $71,380 $63,534 Cash balance, December 31 7,846 Totals $71,380 $71,380