# Anya and Nick Ramon, local golf stars, opened the Chip-Shot Driving Range on March 1, 2020, 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 Ramons leased five acres of land at a cost of \$1,000

Chapter 1, Critical Thinking #5

Anya and Nick Ramon, local golf stars, opened the Chip-Shot Driving Range on March 1, 2020, 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 Ramons 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 \$100 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, Anya and Nick withdrew a total of \$1,000 in cash for personal living expenses. A \$120 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. Anya and Nick 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 \$2,480.

Instructions
With the class divided into groups, answer the following.
a. How could the Ramons 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 Ramons have concluded that the business operated at a net income of \$2,480?
c. Without preparing an income statement, determine the actual net income for March.
d. What was the revenue recognized in March?

## This problem has been solved!

Do you need an answer to a question different from the above? Ask your question!
Related Book For

## Accounting Principles

13th edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

ISBN: 978-1119411482