Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range on March 1, 2008, by investing \($25,000\) of their cash savings in the business. A caddy shack was constructed for cash at a cost of \($8,000,\) and \($800\) was spent on golf balls and golf clubs. The Grays leased five acres of land at a cost of \($1,000\) per month and paid the first month’s rent.

During the first month, advertising costs totaled \($750,\) of which \($150\) was unpaid at March 31, and \($400\) was paid to members of the high-school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15, Mary and Jack withdrew a total of \($1,000\) in cash for personal living expenses. A \($100\) utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was \($18,900.\) 

Mary and Jack thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of \($6,100\) to net income of \($2,450.\) 

Instructions 

With the class divided into groups, answer the following.

(a) How could the Grays have concluded that the business operated at a loss of \($6,100?\) Was this a valid basis on which to determine net income?

(b) How could the Grays have concluded that the business operated at a net income of \($2,450?\) Was this a valid basis on which to determine net income?

(c) Without preparing an income statement, determine the actual net iacome for March.

(d) What was the revenue earned in March?