Question

Patrick formed a lawn service business as a summer job. To start the business on 1 May 2020, he deposited $1,000 in a new bank account in the name of the business. The $1,000 consisted of a $600 loan from ABC Bank to his company, Patrick Lawn Service, and $400 of his own money. The company gave $400 of capital to Patrick. Patrick rented lawn equipment, purchased supplies, and hired other students to mow and trim customers' lawns. At the end of each month, Patrick mailed bills to the customers. On 31 August, he was ready to dissolve the business and return to college. Because he was so busy, he kept few records other than the checkbook and a list of receivables from customers. At 31 August, the business's checkbook shows a balance of $2,000, and customers still owe $750. During the summer, the business collected $5,500 from customers. The business checkbook lists payments for supplies totaling $400, and it still has gasoline, weed trimmer cord, and other supplies that cost a total of $50. The business paid employees $1,800 and still owes them $300 for the final week of the summer. Patrick rented some equipment from DEF Machine Shop. On 1 May, the business signed a six- month rental agreement on mowers and paid $600 for the full rental period in advance. DEF will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Patrick has kept the mowers in excellent condition. In fact, the business had to pay $300 to repair a mower. To transport employees and equipment to jobs, Patrick used a trailer that the business bought for $300. The business estimates that the summer's work used up one-third of the trailer's service potential. The business checkbook lists a payment of $500 for cash withdrawals during the summer. The business paid the loan back during August. (For simplicity, ignore any interest expense associated with the loan.) 

Requirements 

a. Prepare the income statement and the statement of owner's equity of Patrick Lawn Service for the four months 01 May through 31 August 2020.

b. Prepare the classified balance sheet of Patrick Lawn Service at 31 August 2020. 

c. Was Patrick's summer work successful? Give your reasons for your answer.