Mark Davis formed a lawn service company as a summer job. To start the business on May I, he deposited $2,000 in a new bank account in the name of the corporation. The $2,000 con sisted of a $1,600 loan from his father and $400 of his own money. The corporation issued 200 shares ofshare capital to Davis.

Davis rented lawn equipment, purchased supplies, and hired high school students to mow andtrim his customers' lawns. At the end of each month, Davis mailed bills to his customers. OnAugust 31, Davis was ready to dissolve the business and return to Rutgers University for the fallsemester. Because he had been so busy, he had kept few records other than his checkbook and alist of amounts owed by customers.

At August 31, Davis' 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 pay ments for supplies totaling $400, and he still has gasoline, weed.eater cord, and other supplies that cost atotal of $50. He paid his employees wages of $1,900, and he still owes them $200 for the finalweek of the summer.

Davis rented some equipment from Ludwig Tool Company. On May I, he signed a six month lease on mowers and paid $600 for the full lease period. Ludwig will refund the unused portion ofthe prepayment if the equipment is in good shape. To get the refund, Davis has kept the mowersin excellent condition. In fact, he had to pay $300 to repair a mower that ran over a hidden treestump.

To transport employees and equipment to jobs, Davis 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 busi nesscheckbook lists an expenditure of $460 for dividends paid to Davis during the summer.

Also, Davis paid his father back during the summer.

Requirements

1. Prepare the Income Statement of Davis Lawn Service, Inc., for the four months Maythrough August. The business is not subject to income tax.

Prepare the classified Balance Sheet of Davis Lawn Service, Inc., at August 31