Dialogue Period One

Noah Briscoe is a college student at Regent University. He is a rising senior and majors in

business administration. He wants to own his own business one day so that is why he is majoring

in business. He wanted to work a summer job but did not want to be inside all the time due to

Covid. He came up with the idea of starting a landscaping business so he could be outside and

make some money for college. Noah formed a small business with a small loan from his uncle

for $$1,200$ at $10\%$ and $$800$ of his own money. The Noah Briscoe Lawn Service issued $$800$ of

common stock to Noah. Noah rented lawn equipment, purchased the supplies he needed and

hired other students to mow lawns and trim shrubbery. At the end of each month Noah would

mail bills to the customers. On August $31,$ he was ready to dissolve the business so he could

return to college class$$s full time. Because he was so busy he kept few records except for his

checkbook, his receipts and a list of all his customers.

On August $31,$ the business checkbook shows a positive balance, and customers still owed

$$1,500.$ During the four months the business was open the business collected $$12,000$ from

customers. The business checkbook lists payments for supplies totaling $$700,$ and it still has

gasoline, week trimmer cord and other supplies that costs a total of $$100.$ The business paid

employees $$3,600$ and still owes them $$600$ for the final week of the summer. Noah rented some

equipment from the local machine shop. On May $1$ when the business began, the business signed

a six$-$month rental agreement on mowers and paid $$1,200$ for the full rental period in advance.

The machine shop will refund the unused portion of the prepayment if the equipment is returned

in good condition. In order to get the refund, Noah has kept the mowers in excellent condition. In

fact, the business had to pay $$500$ to repair a few of the mowers. In order to transport employees

and equipment to various mowing jobs, Noah used an old truck his grandfather gave him that

was worth about $$500$ and a trailer that the business bought for $$600.$ The business estimates that

the summer$$s work used up one$-$fourth of the truck and trailers service potential. The business

checkbook lists a payment of $$500$ for cash dividends paid to Noah during the summer. The

business paid the loan back during August as well. Other than that Noah has kept all the money

in the business so he can have a nice amount at the end of the summer to help pay for his college

tuition.

$1.$ Prepare the income statement

$2.$ Prepare the statement of retained earnings

$3.$ Prepare the balance sheet in good form.

$4.$ Was the business successful this summer? Give reasons not just a yes or no question!

$5.$ Ethics question$-$Please answer the ethics questions and back it up with reasons, not

just yes or no$.$ Please include scripture references as well to receive full credit!

Management and Earnings$-$revenues for most businesses are recognized when the

services are completed. But because GAAP allows for some freedom in the revenue

concept, some managers believe it is necessary to manage earnings. Some managers use

rational judgment to justify earnings management because they believe they can better

provide investors and creditors with reported earnings, which usually shows the company

in a positive light.

A$.$ List at least $4$ parties affected by earnings management at companies.

B$.$ Is earnings management good or bad?

C$.$ Is earnings management legal and ethical?

D$.$ What corporate governance is in place at most organizations and companies, whether

for profit or nonprofit to limit earnings management?