Preparing a balance sheet

timer Asked: Feb 1st, 2015

Question description

William Murray achieved one of his life-long dreams by opening his own business, The Caddie Shack Driving Range, on May 1, 2014. He invested $19,200 of his own savings in the business. He paid $6,360 cash to have a small building constructed to house the operations and spent $820 on golf clubs, golf balls, and yardage signs. Murray leased 4 acres of land at a cost of $1,100 per month. (He paid the first month’s rent in cash.) During the first month, advertising costs totaled $770, of which $150 was unpaid at the end of the month. Murray paid his three nephews $400 for retrieving golf balls. He deposited in the company’s bank account all revenues from customers ($4,780). On May 15, Murray withdrew $820 in cash for personal use. On May 31, the company received a utility bill for $100 but did not immediately pay it. On May 31, the balance in the company bank account was $13,860.

Murray is feeling pretty good about results for the first month, but his estimate of profitability ranges from a loss of $5,340 to a profit of $1,590.

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