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At the end of her first year of university, Dorothy Taylor decided that she should start a business to help finance her education, so she

At the end of her first year of university, Dorothy Taylor decided that she should start a business to help finance her education, so she set up her own courier service. She invested savings of $1,300 in the company, which she called Sandhill Ltd. In addition, her parents lent the company $5,100 to help it get started. Since this was a business venture, Dorothy insisted on paying interest on this loan, and her parents agreed to charge a rate of 6% per year. Dorothy then negotiated the purchase of a used car for the business for $8,400. The company made a down payment of $3,300 on the car and financed the remainder of the purchase price at an interest rate of 9% per year. Due to all of the kilometres that would be put on the car while it was used in the courier business, Dorothy estimated that the car could be sold at the end of the summer for $6,500. Sandhill began operations on May 1 and continued until August 31. Although Dorothy did not keep any formal accounting records, at the end of the summer she put together the following additional information related to the business: 1. During the summer, the company made payments of $663 on the car, which included interest of $153 and principal of $510.2. No payments (of either interest or principal) were made on the loan from her parents. 3. Dorothy paid herself a salary of $1,200 per month for the four months that the business operated. Payments for other operating costs (including advertising, insurance, and gas) totalled $9,000. In addition, there were unpaid 4. bills totalling $200 at the end of August. Courier charges collected from customers totalled $20,800. In addition, customers still owed $350 for services performed in 5. the last two weeks of August. After the close of business on August 31, there was a balance of $9,362 in the companys bank account, plus a float of $75 in 6. the car.

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