Reference no: EM132060052

Question: While pursuing his undergraduate studies, Bruno Clarke needed to earn sufficient money for the coming academic year. Unable to obtain a job with a reasonable salary, he decided to try the lawn care business for three months during the summer. After a survey of the market potential, Bruno bought a used pick-up truck on June 1 for $ 3,000. On each door he painted "Bruno's Lawn Service, Tel: 555- 9623." He also spent $ 1,800 for mowers, trimmers, and tools. To acquire these items, he borrowed $ 5,000 cash by signing a note payable, promising to pay the $ 5,000 plus interest of $ 150 at the end of the three months (ending August 31). At the end of the summer, Bruno realized that he had done a lot of work, and his bank account looked good. This fact prompted him to become concerned about how much profit the business had earned.

A review of the cheque stubs showed the following: bank deposits of collections from customers totaled $ 25,200. The following cheques had been written: gas, oil, and lubrication, $ 1,840; mower repair, $ 150; helpers, $ 9,500; payroll taxes, $ 400; truck repairs, $ 410; payment for assistance in preparing payroll tax forms, $ 50; insurance, $ 240; telephone, $ 210; miscellaneous supplies used, $ 160; and $ 5,150 to pay off the note, including interest (on August 31). A notebook kept in the truck, plus some unpaid bills, reflected that customers still owed him $ 1,250 for lawn services rendered and that he owed $ 200 for gas and oil (credit card charges). He estimated that the cost for use of the truck and the other equipment (depreciation) for three months amounted to $ 1,000.

Required:

1. Prepare a quarterly statement of earnings for Bruno's Lawn Service for the months of June, July, and August 2014. Use the following main captions: Revenues from services, Expenses, and Net earnings. Because this is a sole proprietorship, the company will not be subject to income tax.

2. Prepare a statement of financial position for Bruno's Lawn Service as at August 31, 2014. Bruno's business is a proprietorship with one equity item: Bruno Clarke, capital.

3. Do you see a need for one or more additional financial reports for this business for 2014 and thereafter? Explain.