Simon Fraser started a landscaping and lawn-care business in April by investing $20,000 cash in the business in exchange for capital stock. Because his business is in the Midwest, the season begins in April and concludes in September. He prepared the following trial balance (with accounts in alphabetical order) at the end of the first season in business: Fraser Landscaping Trial Balance September 30 Debits Credits Accounts Payable - $13,000 Accounts Receivable $23,000 Capital Stock 20,000 Cash 1,200 Gas and Oil Expense 15,700 Insurance Expense 2,500 Landscaping Revenue 33,400 Lawn Care Revenue 24,000 Mowing Equipment 5,000 Rent Expense 6,000 Salaries Expense 22,000 Truck 15,000 Totals $90,400 $90,400 Simon is pleased with his first year in business. "I paid myself a salary of $22,000 during the year and still have $1,200 in the bank. Sure, I have a few bills outstanding, but my accounts receivable will more than cover those." In fact, Simon is so happy with the first year that he has come to you in your role as a lending officer at the local bank to ask for a $20,000 loan to allow him to add another truck and mowing equipment for the second season. 1. From your reading of the trial balance, what do you believe Simon did with the $20,000 in cash he originally contributed to the business? Reconstruct the journal entry to record the transaction that you think took place. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect),"" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Journal Balance Sheet Income Statement Stockholders' Net Description Debit Credit Assets Liabilities + Equity Revenues Expenses Income Prepare an income statement for the six months ended September 30. Fraser Landscaping Income Statement For the Six Months Ended September 30 Revenues: Expenses: 3. The mowing equipment and truck are assets that will benefit the business for a number of years. How should the costs associated with the purchase of these assets be recognized? 4. Prepare a classified balance sheet as of September 30. Fraser Landscaping Balance Sheet September 30 Assets Current assets: Total current assets Property, plant, and equipment: Total property, plant, and equipment Total assets $ Liabilities and Stockholders' Equity Current liabilities: Total stockholders' equity Total liabilities and stockholders' equity 5. You have approached a bank for loan. Which of these factors would the banker consider before making a loan? a. Percentage of uncollectedof uncollected accounts receivables. b. Cash balance and ability to repay creditors. C. The current profitability ratio. d. No of employees in the organization