Amber Keck, a junior in college, has been seeking ways to earn extra spending money. As an active sports enthusiast, Amber plays tennis regularly at the North Fulton Tennis Club, where her family has a membership. The president of the club recently approached Amber with the proposal that she manage the club's tennis courts. Amber'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 Amber $200 per week, plus Amber could keep whatever she earned from lessons and the fees from the use of the ball machine. The club and Amber agreed to a one-month trial, after which both would consider an arrangement for the remaining two years of Amber's college career. On this basis, Amber organized Deuce. During June 2009, Amber managed the tennis courts and entered into the following transactions:

a. Opened a business account by depositing $1,250.

b. Paid $250 for tennis supplies (practice tennis balls, etc.).

c. Paid $150 for the rental of video equipment to be used in offering lessons during June.

d. Arranged for the rental of two ball machines during June for $200. Paid $100 in advance, with the remaining $100 due July 1.

e. Received $1,500 for lessons given during June.

f. Received $400 in fees from the use of the ball machines during June.

g. Paid $600 for salaries of part-time employees who answered the telephone and took reservations while Amber was giving lessons.

h. Paid $120 for miscellaneous expenses.

i. Received $800 from the club for managing the tennis courts during June.

j. Determined that the cost of supplies on hand at the end of the month totaled $150; therefore, the cost of supplies used was $100.

k. Withdrew $270 for personal use on June 30.

As a friend and accounting student, you have been asked by Amber to aid her in assessing the venture.

1. Indicate the effect of each transaction and the balances after 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 of June 30.
5. a. Assume that Amber Keck could earn $8 per hour working 30 hours a week as a waitress. Evaluate which of the two alternatives, working as a waitress or operating Deuce, would provide Amber with the most income per month.
b. Discuss any other factors that you believe Amber should consider before discussing a long-term arrangement with the North Fulton TennisClub.

Transcribed Image Text:

Owner's Equity = Liabilities + Assets Amber Amber Keck, Drawing + Revenue Accounts Salary Service Rent Misc. Keck, Supplies Cash + Supplies = Payable + Capital - Expense - Expense - Expense Expense