During the summer between his junior and senior years, James Cook needed to earn sufficient money for the coming academic year. Unable to obtain a job with a reasonable salary, he decided to try the lawn care business for three months. After a survey of the market potential, James bought a used pickup truck on June 1 for $1,800. On each door he painted “James Cook Lawn Service, Phone 471 44S7’ He also spent $900 for mowers, trimmers, and tools. To acquire these items, he borrowed $3,000 cash by signing a note payable promising to pay the $3,000 plus interest of 578 at the end of the three months (ending August 31).
At the end of the summer, James realized that he had done a lot of work, and his bank account looked Good. This fact prompted him to become concerned about how much profit the business had earned.
A review of the check stubs showed the following: Bank deposits of collections from customers totaled 515,000. The following checks had been written: gas, oil, and lubrication. $1,050; pickup repairs, $250; mower repair, SI 10; miscellaneous supplies used, $80; helpers, $5,400; payroll taxes, $190; payment for assistance in preparing payroll tax forms, 525; insurance, $125; telephone, $ 110; and $3,078 to pay off the note including interest (on August 31). A notebook kept in the pickup, plus some unpaid bills, reflected that customers still owed him 5700 for lawn services rendered and that he owed 5180 for gas and oil (credit card charges). He estimated that the cost for use of the truck and the other equipment (called depreciation) for three months amounted to $600.
Required:1. Prepare a quarterly income statement for James Cook Lawn Service for the months June, July, and August 2014. Use the following main captions: Revenues from Services, Expenses, and Net Income. Assume that the company will not be subject to income tax.2. Do you see a need for one or more additional financial reports for this company for 2014 and thereafter? Explain.