Analyzing a Student's Business and Preparing an Income Statement and a Statement of Financial Position While pursuing her undergraduate studies, Brigitte Lebeau needed to earn sufficient money for the coming academic year. Unable to obtain a job with a reasonable salary, she decided to try the lawn care business for three months during the summer. After a survey of the market potential, Brigitte bought a used pick-up truck on June 1 for \(\$ 1,500\). On each door she painted "Brigitte's Lawn Service, Phone 471-4487." She also spent \(\$ 900\) for mowers, trimmers, and tools. To acquire these items, she borrowed \(\$ 2,500\) cash by signing a note payable, promising to pay the \(\$ 2,500\) plus interest of \(\$ 75\) at the end of the three months (ending August 31 ).

At the end of the summer, Brigitte realized that she had done a lot of work, and her bank account looked good. This fact prompted her to become concerned about how much profit the business had earned.

A review of the cheque stubs showed the following: bank deposits of collections from customers totalled \(\$ 12,600\). The following cheques had been written: gas, oil, and lubrication, \(\$ 920\); truck repairs, \(\$ 210\); mower repair, \(\$ 75\); miscellaneous supplies used, \(\$ 80\); helpers, \(\$ 4,500\); payroll taxes, \(\$ 175\); payment for assistance in preparing payroll tax forms, \(\$ 25\); insurance, \(\$ 125\); telephone, \(\$ 110\); and \(\$ 2,575\) to pay off the note including interest (on August 31). A notebook kept in the truck, plus some unpaid bills, reflected that customers still owed her \(\$ 800\) for lawn services rendered and that she owed \$200 for gas and oil (credit card charges). She estimated that the cost for use of the truck and the other equipment (called depreciation) for three months amounted to \(\$ 500\).

Required:

1 Prepare a quarterly income statement for Brigitte's Lawn Service for the months of June, July, and August 2011. Use the following main captions: Revenues from services, Expenses, and Profit. Because this is a sole proprietorship, the company will not be subject to income tax.

2 Prepare a statement of financial position for Brigitte's Lawn Service as at August 31, 2011. Brigitte's business is a proprietorship with one equity item: Brigitte Lebeau, capital.

3 Do you see a need for one or more additional financial reports for this company for 2011 and thereafter? Explain.