Your friend, Diane Kiefner, teaches elementary school and operates her own wilderness kayaking tours in the summers. She thinks she has been doing fine financially, but has never really measured her profits. Until this year, her business has always had more money at the end of the summer than at the beginning. She enjoys kayaking and as long as she came out a little ahead, that was fine. Unfortunately, Diane had to dip into her savings to make up for "losses" on her kayaking tours this past summer. Hearing that you have been studying accounting, she brought a list of cash receipts and expenditures and would like you to try to figure out what happened.

Cash balance beginning of summer $15,000

Cash receipts from kayakers over the summer $10,000

Cash expenditures over the summer 13,500

Amount taken from savings (3,500)

Cash balance end of summer $11,500

When asked for more details on the expenditures and the kayaking gear that you saw in her garage, Diane provided the following information:

Expenditures were made on the following items:

Brochures used to advertise her services (Diane only

used about 1/4 of them and plans to use the

remainder over the next three summers.) $1,000

Food for trips (nothing left) 2,000

Rent on equipment used by kayakers on trips 3,000

Travel expenses 4,000

A new kayak and paddles (At the beginning of the summer, Diane bought a new kayak and paddles. Up to this time, she had always borrowed her father's. Diane expects to use the equipment for about five years. At that time, she expects it to have no value.) 3,500 A trial balance based on this information follows. As you will note, Diane's trial balance is not consistent with some of the concepts discussed in this chapter.

REQUIRED
1. Complete Diane's work sheet by making appropriate adjustments and extensions. Note: (a) You may need to add new accounts. (b) Some of the adjustments you need to make are actually "corrections of errors" Diane has made in classifying certain items.
2. What is your best measure of Diane's net income for the summer of20--?

Transcribed Image Text:

Diane Kiefner's Wildemess Kayaking Tours Work Sheet For Summer Ended 20-- ADISTMENTS ADRSTIDTRAL BALANCE BALANCE SARET AL BALANE INCOME STATEMEY ACCOLN TITE DIBIT DEIT DEBIT CENI CREIT CRENT CRIDIT DEB CRDT 11 500 00 1 Cash 2 Diane Kiefner, Capital 3 Tour Revenue 4 Advertising Supplies Expense 5 Food Expense 6 Equipment Rental Expense 7 Travel Expense 8 Kayak Expense 15 000 00 10 000 00 1000 00 4 2000 00 5. 3000 00 4000 00 3500 00 7. 25 000 00 25 000 00