Question

On April 12, 2015 John signed a lease agreement to operate a store that was owned by Jumbo Company. John had contacted the regional manager of Jumbo in response to an advertisement that solicited applicants “with $100,000 to invest” to lease and operate a newly erected Jumbo gas station. The regional sales manager for Jumbo Company was impressed with John’s personal and financial qualifications, and after a few interviews, a lease agreement was signed. The lease agreement stipulated that John pays a rental of $.5000 per month to Jumbo. John was required, as a sign of good faith and as a pre-payment on certain obligations that would be incurred shortly, to deposit $.100,000 with Jumbo at the time the lease was signed. 

John raised the cash for this deposit. Jumbo used most of the deposit to defray certain obligations incurred by John to the company prior to the opening of the new station. The deductions from the $.80,000, deposit were applied as follows: 

Inventories                                                                                           $.53,000 

Rent deposit equivalent to one month rent                                          $5,000 

Down payment (on John's behalf on equipment costing sh. 51,500)  $10,300

The equipment became John's property. A representative of the Jumbo company stated that the equipment would last about five years. The unpaid, non interest bearing balance of $.41,200 John owed Jumbo for equipment was to be paid in five semi-annual installments of $.8,240 each. The first payment was due December 1st 2015. The $.11,700 remaining balance from the $.80,000 originally deposited with Jumbo was returned to John on May 30. He deposited this amount in a current account he had set up for his gas station. 

Just before opening business on June 1, John raised additional cash of $.28,000 which he also deposited in the current account. Prior to June 1, he wrote a check of $ 6,600 for office furniture that had an expected life of 10 years. 

On June 1, the service station was opened for business. John maintained a simple recordkeeping system in which cash receipts and cash payments were itemized daily in a loose-leaf notebook. During the months of June and July, the following cash receipts and payments had been recorded: 

 Cash receipts (June and July) 

Sales                                                                     $278,040 

Purchases                                                             178,776

Rent                                                                       10,000

Staff costs                                                              37,800

Utilities                                                                   1,780

Advertising                                                              2,760

Miscellaneous                                                         1,420

Withdrawals by John (July1 and July 19)              27,000

In addition to the record of cash receipts and payments, a detailed listing was kept of the amounts of money that were due from or owed to individuals and companies. An analysis of these records revealed that $572 was due from a businessman who preferred to fuel her automobile on a credit basis. 

Wages earned by the station’s employees and outstanding as at July 30, 2015 was $928. John took a physical inventory on the evening of July 30 and found inventory on hand totaling $ 40,072. A further summary of his records revealed the following unpaid bills resulting from operations in July: 

Jumbo Company for merchandise $7,216 

Utilities for the month of July 1,700 

Required:A statement of comprehensive income for the two months ended and statement of financial position as at July 30th 2015.