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ACC 102 Spring 2021 Review Problem Kathy Whelan formed a lawn service business as a summer job. To start the business on May 1, 2020, she deposited $1,000 in a new bank account in the name of the business. The $1,000 consisted of a $600 loan from Bank One to her company, Whelan Lawn Service, and $400 of her own money. The company issued $400 of capital to Kathy Whelan. To get the company going, she rented lawn equipment, purchased supplies, and hired other students to mow and trim customers' lawns. At the end of each month, Whelan mailed bills to the customers. On August 31, she was ready to dissolve the business and return to college. Because she was so busy, she kept few records other than the checkbook and a list of receivables from customers. The following information is provided as of August 31st: 1. The business's checkbook (cash account) shows a balance of $2,000 as of August 31st. 2. Customers still owe $750 to the business as of August 31st. 3. During the summer, the business collected $5,500 from customers. 4. The company checkbook lists payments for supplies totaling $400. There is still gasoline, weed trimmer cord, and other supplies that cost a total of $50 remaining in the business as of August 31st 5. The business paid employees $1,800 and still owes them $300 for the final week of the summer. 6. Whelan rented some equipment from Ludwig's Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid $600 for the full rental period in advance. Ludwig's will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Whelan has kept the mowers in excellent condition. In fact, the business had to pay $300 to repair a mower. 7. To transport employees and equipment to jobs, Whelan used a trailer (equipment) that the business bought for $300. The business estimates that the summer's work used up one-third of the trailer's service potential (depreciation). 8. The business checkbook lists a payment of $500 for cash withdrawals during the summer for Whelan's personal use. 9. The business paid the loan back during August that was taken out on May 1st. (For simplicity, ignore any interest expense associated with the loan.) Requirements 1. Prepare the journal entries for all the transactions for the period May 1 to August 31. Make sure you include the 2. Prepare the income statement and the statement of owner's equity of Whelan Lawn Service for the four months May 1 through August 31, 2020. 3. Prepare the classified balance sheet of Whelan Lawn Service at August 31, 2020. 4. Was Kathy Whelan's summer work successful? Give your reason for your answer. ACC 102 Spring 2021 Review Problem Kathy Whelan formed a lawn service business as a summer job. To start the business on May 1, 2020, she deposited $1,000 in a new bank account in the name of the business. The $1,000 consisted of a $600 loan from Bank One to her company, Whelan Lawn Service, and $400 of her own money. The company issued $400 of capital to Kathy Whelan. To get the company going, she rented lawn equipment, purchased supplies, and hired other students to mow and trim customers' lawns. At the end of each month, Whelan mailed bills to the customers. On August 31, she was ready to dissolve the business and return to college. Because she was so busy, she kept few records other than the checkbook and a list of receivables from customers. The following information is provided as of August 31st: 1. The business's checkbook (cash account) shows a balance of $2,000 as of August 31st. 2. Customers still owe $750 to the business as of August 31st. 3. During the summer, the business collected $5,500 from customers. 4. The company checkbook lists payments for supplies totaling $400. There is still gasoline, weed trimmer cord, and other supplies that cost a total of $50 remaining in the business as of August 31st 5. The business paid employees $1,800 and still owes them $300 for the final week of the summer. 6. Whelan rented some equipment from Ludwig's Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid $600 for the full rental period in advance. Ludwig's will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Whelan has kept the mowers in excellent condition. In fact, the business had to pay $300 to repair a mower. 7. To transport employees and equipment to jobs, Whelan used a trailer (equipment) that the business bought for $300. The business estimates that the summer's work used up one-third of the trailer's service potential (depreciation). 8. The business checkbook lists a payment of $500 for cash withdrawals during the summer for Whelan's personal use. 9. The business paid the loan back during August that was taken out on May 1st. (For simplicity, ignore any interest expense associated with the loan.) Requirements 1. Prepare the journal entries for all the transactions for the period May 1 to August 31. Make sure you include the 2. Prepare the income statement and the statement of owner's equity of Whelan Lawn Service for the four months May 1 through August 31, 2020. 3. Prepare the classified balance sheet of Whelan Lawn Service at August 31, 2020. 4. Was Kathy Whelan's summer work successful? Give your reason for your