Richard Harris opened a gym and fitness studio called Body Builders Fitness Center at the beginning of November of the current year. It is now the end of December, and Harris is trying to determine whether he made a profit during his first two months of operations. You offer to help him and ask to see his accounting records. He shows you a shoe box and tells you that every piece of paper pertaining to the business is in that box.
As you go through the material in the shoe box, you discover the
following:
A receipt from Galloway Properties for $9,000 for November’s
rent on the exercise studio.
Bank deposit slips totaling $7,500 for money collected from
customers who attended exercise classes.
An invoice for $40,000 for exercise equipment. The first payment is
not due until December 31.
A bill for $2,100 from the maintenance service that cleans the
studio. Harris has not yet paid this bill.
A December 19 parking ticket for $75. Harris says he was in a hurry
that morning to get to the Fitness Center on time and forgot to put
money in the parking meter.
A handwritten list of customers and fees for the classes they have
taken. As the customers attend the classes, Harris writes their
names and the amount of each customer’s fee on the list. As
customers pay, Harris crosses their names off the list. Fees not
crossed off the list amount to $3,200.
A credit card receipt for $600 for printing flyers advertising the
grand opening of the studio. For convenience, Harris used his
personal credit card.
A credit card receipt for $700 for four warm-up suits Harris bought
to wear at the studio. He also put this purchase on his personal
credit card.
1. Prepare an income statement for the first two months ended on
December 31 2019 of operation of Body Builders Fitness Center.
Description | Amount | Nature | Part of financial statement | Remarks |
Rent | 9,000 | Expense | Income statement | The slip is for Nov and hence we should also consider Dec rent |
Client receipts | 7,500 | Income | Income statement | |
Equipment | 40,000 | Assets | Balance Sheet | |
Maintenance | 2,100 | Expense | Income statement | |
Parking | 75 | Expense | Income statement | |
Client fee receivable | 3,200 | Income | Income statement | |
Advertisement | 600 | Expense | Income statement | |
Dressing charge | 700 | Expense | Income statement | |
Income statement | ||||
Revenue | ||||
Client fee received | 7,500 | |||
Client fee receivable | 3,200 | 10,700 | ||
Expense | ||||
Rent-Nov | 9,000 | |||
Rent-Dec | 9,000 | |||
Maintenance | 2,100 | |||
Parking | 75 | |||
Advertisement | 600 | |||
Dressing charge | 700 | 21,475 | ||
Net profit/(loss) | (10,775) |
Richard Harris opened a gym and fitness studio called Body Builders Fitness Center at the beginning...
Richard Harris opened a gym and fitness studio called Body Builders Fitness Center at the beginning of November of the current year. It is now the end of December, and Harris is trying to determine whether he made a profit during his first two months of operations You offer to help him and ask to see his accounting records. He shows you a shoe box and tells you that every piece of paper pertaining to the business is in that...
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