Below is Tom and Jerry's landscaping company's balance sheet at the beginning of April:

Tom & Jerry's

Balance Sheet

March 31, 2020

Assets

Cash $12,000

Accounts receivable 1,000

Inventory 10,000

Rent deposit 2,000

Total assets $35,000

Liabilities and Shareholder's Equity

Liabilities $5,000

Owner's Equity 30,000

Total liabilities and shareholder's equity $35,000

During April, the following transactions took place:

i. Collected $5,000 of the money owed by customers.

ii. Provided landscape services to customers for $4,000, and received payment in cash.

iii. Provided landscaping services to customers on credit for $10,000.

iv. Incurred operating expenses paid in cash for $5,000.

v. Incurred operating expenses on credit for $2,000.

vi. Paid $5,000 to settle the liabilities owed at the beginning of the period.

vii. Discovered that a customer who owed them $1,000 has just declared bankruptcy, and

they do not expect to recover the amount owed.

viii. At the end of the month, Tom and Jerry each took $2,500 out of the company for

personal living expenses.

ix. At the end of the month, they owed a further $1,000 for utilities.

Instructions: Please make a report to Tom and Jerry that includes the following:

1. Make an income statement and balance sheet for the month of April.

2. For Tom and Jerry's business, they can multiply the first month's income by 12 to get an estimate of this year's income. Calculate the return on assets and return on equity. In what ways is multiplying the first month's income by 12 a reasonable way of estimating their annual income, and why might it be suspect?

3. Tom and Jerry are considering incorporating next year so that they may expand their business operations by issuing shares. What should Tom and Jerry know about the price to earnings and price to book ratios? Use real life industry examples to back your reasoning.

4. Today, more than ever, it is essential for companies to be socially responsible. Describe how a landscaping business may be able to achieve social return on investment.