Challenge Problem

Your friend, Diane Kiefner, teaches elementary school and operates her own wilderness kayaking tours in the summers. She thinks she has been doing fine financially, but has never really measured her profits. Until this year, her business has always had more money at the end of the summer than at the beginning. She enjoys kayaking and as long as she came out a little ahead, that was fine. Unfortunately, Diane had to dip into her savings to make up for "losses" on her kayaking tours this past summer. Hearing that you have been studying accounting, she brought a list of cash receipts and expenditures and would like you to try to figure out what happened.

Cash balance beginning of summer

$$15,000$

Cash receipts from kayakers over the summer $$10,000$

Cash expenditures over the summer

$13,500$

Amount taken from savings

$\frac{(3,500)}{\text{\$}11,500}$

Cash balance end of summer

When asked for more details on the expenditures and the kayaking gear that you saw in her garage, Diane provided the following information:

Expenditures were made on the following items:

Brochures used to advertise her services $($Diane only used about $\frac{1}{4}$ of them and plans to use the remainder

over the next three summers.$)$

Food for trips $($nothing left$)$

Rent on equipment used by kayakers on trips

Travel expenses

$$1,000$

$2,000$

$3,000$

$4,000$

A new kayak and paddles $($At the beginning of the summer, Diane bought a new kayak and paddles. Up to this time, she had always borrowed her father's. Diane expects to use the equipment for about five years. At that time, she expects it to have no value.$)$

$3,500$

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