Jeff Smith formed a lawn service company as a summer job on his break from college. To start the business on May 1, 2020 he deposited $10,000 in a new bank account in the name of the corporation. The $10,000 consisted of a $6,400 loan from his father and $3,600 of his own money. The corporation issued 200 shares of common stock to Smith in exchange for the $3,600 invested.

Smith rented law equipment, purchased supplies, and hired high school students to mow and trim his customers lawns. At the end of each month, Smith mailed bills to his customers. On August 31, 2020 Smith was ready to dissolve the business and return to college for the fall semester. Because he had been so busy, he had kept few records other than his checkbook and a list of amounts owed by customers.

As of August 31, Smiths checkbook shows a balance of $6,920, and his customers still owe him $1,600. During the summer, he collected $12,400 from customers. His checkbook lists payments for supplies totaling $900, and he still has gasoline, weed eater cord, and other supplies that cost a total of $150. He paid his employees wages of $4,800, and he still owes them $800 for the final week of the summer.

Smith rented some equipment from Lawn Tools R Us. On May 1, he signed a six-month lease on mowers and paid $1,500 for the full lease period. Lawn Tools R Us will refund the unused portion of the prepayment if the equipment is in good shape. To get the refund, Smith has kept the mowers in excellent condition. In fact, he had to pay $400 to repair a mower that ran over a hidden tree stump.

To transport employees and equipment to jobs, Smith used a trailer that he bought for $900. He figures that the summers work used up one-half of the trailers service potential. The business checkbook lists expenditures of $580 for dividends paid to Smith during the summer. Also, Smith paid his father back during the summer (assume no interest was paid on the loan).

Jeff Smith does not have any prior accounting experience. He asks you to look over the records to help him determine if the business was successful and if he should start the business again when he returns from college next summer.

Requirements:

Please prepare the closing entries for the business. And a conclusion to explain whether the business is successful or not.