Jeff Smith $($Smith$)$ formed a lawn service company as a summer job on his break from college. To start

the business on May $1,$ he deposited $$2,000$ in a new bank account in the name of the corporation. The

$$2,000$ consisted of a $$1,600$ loan his father made to the business and $$400$ of his own money he

invested in the business. The corporation issued $200$ shares of common stock to Smith in exchange for

the $$400$ investment.

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 $31,$ 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.

At August $31,$ Smith$$s checkbook shows a balance of $$2,040,$ and his customers still owe him $$600.$

During the summer, he collected $$5,600$ from customers. His checkbook lists payments for supplies

totaling $$400,$ and he still has gasoline, weed eater cord, and other supplies that cost of total of $$50.$ He

paid his employees wages of $$1,900,$ and he still owes them $$200$ 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 $$600$ 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 $$300$ 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 $$300.$ He figures

that the summer$$s work used up one$-$third of the trailer$$s service potential. The business checkbook lists

expenditures of $$460$ 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

$1.$ Was this business successful?

$2.$ Write the journal entries for the all the transactions $($except adjusting entries$)$ listed in the

scenario above.

$3.$ Using the journal entries prepared in requirement $2$ above, post the journal entries to the ledger

$($T$-$accounts$).$

$4.$ Using the T$-$accounts in requirement $3$ above, prepare an unadjusted trial balance.

$5.$ Prepare the appropriate adjusting journal entries and post to the ledger.

$6.$ Prepare an adjusted trial balance.

$7.$ use the adjusted trial balance to prepare the income statement for Smith Lawn Services Inc., in good form for the four month period ending August $31.$ Assume the business is not subjected to income tax.