Jan Martinelli a college student has been seeking ways to
Jan Martinelli, a college student, has been seeking ways to earn extra spending money.
As an active sports enthusiast, Jan plays tennis regularly at the North Fulton Tennis Club, where her family has a membership. The president of the club recently approached Jan with the proposal that she manage the club's tennis courts. Jan's primary duty would be to supervise the operation of the club's four indoor and six outdoor courts, including court reservations.
In return for her services, the club would pay Jan $300 per week, plus Jan could keep whatever she earned from lessons and the fees from the use of the ball machine.
The club and Jan agreed to a one-month trial, after which both would consider an arrangement for the remaining year of Jan's college program. On this basis, Jan organized Topspin. During June 2014, Jan managed the tennis courts and entered into the following transactions:
a. Opened a business account by depositing $1,000.
b. Paid $300 for tennis supplies.
c. Paid $200 for the rental of video equipment to be used when offering lessons during June.
d. Arranged for the rental of two ball machines during June for $250. Paid $150 in advance, with the remaining $100 due July 1.
e. Received $1,600 for lessons given during June.
f. Received $500 in fees from the use of the ball machines during June.
g. Paid $800 for salaries of part-time employees who answered the telephone and took reservations while Jan was giving lessons.
h. Paid $225 for miscellaneous expenses.
i. Received $1,200 from the club for managing the tennis courts during June.
j. Withdrew $270 for personal use on June 30.
As a friend and accounting student, you have been asked by Jan to aid her in assessing the venture.
1. Indicate the effect of each transaction using the following tabular headings:
2. Prepare an income statement for June.
3. Prepare a statement of owner's equity for June.
4. Prepare a balance sheet as at June 30, 2014.
5. a. Assume that Jan Martinelli could earn $9 per hour working 30 hours a week as a waitress. Evaluate which of the two alternatives, working as a waitress or operating Topspin, would provide Jan with more income per month.
b. Discuss any other factors that you believe Jan should consider before negotiating a long-term arrangement with the North Fulton Tennis Club.
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