During high school Sam worked several years in a bicycle shop helping customers and repairing and assembling bicycles. After h is senior year, he decided to go into business for himself during the summer t o earn money for college h is freshman year. Since his neighborhood had a large number of bicycle enthusiasts of all ages, he decided to set up a bike repair shop in his parents’ garage. He had less than $1,000 so he negotiated with his former employer at the bicycle shop to rent the tools that he would need. The rental fee agreed upon was $400 (the tools would have cost over $2,000 to buy). His dad was not happy about losing his garage and parking in the street all summer, but decided to do it if Sam paid to rent the garage space. Sam agreed to pay his dad $900 to rent the garage for 3 months.
Sam decided to call his business “Sam’s Bicycle Repair Inc.” His mother was an attorney and took care of the work for incorporating his business with the state. To better keep track of his business, Sam opened a bank account in the name of his business and on May 31, he deposited $700 of his personal funds. This was his initial investment and he printed a stock certificate on his computer for one share of stock. He issued the stock to himself for his initial investment. The first check he wrote out of his account was for a large sign to hang on the garage to advertise his business.
Sam provided outstanding services to his customer/neighbors all summer. They would phone him and he would determine whether he could take his tools over to the customer’s house to perform the needed repairs or whether the repairs would have to be performed in his shop (garage). He would even go and get the bikes to be repaired and deliver them when the repairs were completed. He did not expect his repair business to be a full time job, so he also worked on the grounds maintenance crew at his school. That meant no one was home during the day so he set up his parents’ answering machine to say
“Thanks for calling Sam’s SUPER Bicycle Repair. Leave a message and I’ll return your call in a snap! Your bike will be running BETTER than new at a price so low that you WON’T believe it!”
Although his parents weren’t happy about the message on their phone – his dad wanted to charge him rent for the answering machine and for the use of the phone too – they decided to just live with it for the summer.
All summer Sam was very careful about depositing all cash collected from his customers in his business bank account and paying all his business expenses by writing checks from the business account. He didn’t put any of the money from his school job in his business account Also, he didn’t take any cash out of that account for personal use since he received a weekly paycheck from his school.
At the end of the summer, Sam decided to end his business and concentrate on his freshman year in college. He returned all the tools to the bike shop and cleaned the garage so his parents could get their cars back in. Then he sat down to figure out how his business did. At August 31, he had $4,000 cash in his business account. The total revenue from repairing bikes was $4,557 and he had collected all but $400 of that which two customers still owed to Sam’s. He had only written a few checks and they are all listed below:
Date Payee CK# Payment was for: Amount
June 1 Eastern Sign Co. 101 Sign to hang on garage advertising business $500.00
June 1 Michigan Tool Supp 102 Supplies (grease, oil, rags, etc.) $57.00
June 1 Superb Cycles 103 First installment on tool rental $100.00
July 1 Superb Cycles 104 Second installment on tool rental $100.00
Aug 1 Superb Cycles 105 Third installment on tool rental $100.00
Calculate is the Balnce sheet for 5/31/2016.
Calculate is the statement of cash flows from June through August 2016.
Calculate the Income statement from June through August 2016.
Calculate the statement of changes in retained earnings June through August 2016?.
Calculate is the balance sheet for 8/31/2016?.