Reference no: EM132080051

Question: Tom Field formed a lawn service company as a summer job. To start the business on May 1, he deposited $5,000 in a new bank account in the name of Tomcat Corporation (hereafter called "Tomcat"), consisting of a $2,000 loan to Tomcat from his father and $3,000 of money he had saved. The corporation issued 3,000 shares of Tomcat to Tom. Tomcat rented lawn equipment, purchased supplies and hired other college students to mow and trim the customers' lawns.At the end of each month, Tomcat mailed bills to the customers. On August 31, Tom was ready to sell the stock of Tomcat to a local lawn company and return to Baylor University for the fall semester. Because he had been so busy, he had kept few records other than Tomcat's checkbook and a list of amounts owed by customers. At August 31, Tomcat's checkbook shows a balance of $3,675, and the customers still owe $900. During the summer, Tomcat collected $6,800 from customers. The checkbook lists payments for supplies totaling $1,000, and he still has on hand gasoline, trimmer cord, and other supplies that cost a total of $50.

Tomcat paid employees $2,100, and still owes them $275 for the final week of the summer. Tomcat rented some equipment from Ludwig Tool Company. On May 1, Tomcat signed a six-month lease on mowers and paid $1,200 for the full lease period. Ludwig will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Tomcat has kept the mowers in excellent condition. In fact, Tomcat had to pay $325 to repair a mower that ran over a hidden tree stump. To transport employees and equipment to jobs, Tom used a trailer that Tomcat bought for $900. He figures that the summer's work used up one-third of the trailer's service potential. The checkbook lists an expenditure of $600 for dividends paid by Tomcat to Tom during the summer. Tomcat paid off the loan from Tom's father toward the end of the summer. His father did not charge him any interest.

Required: 1. Prepare the income statement of Tomcat for the four months ended August 31. Do not consider the effects of income taxes.

2. Prepare the statement of retained earnings of Tomcat for the four months ended August 31.

3. Prepare the classified balance sheet of Tomcat as of August 31. Show all work for partial credit. You should show journal entries, T-accounts, and a trial balance, as well as all items requested above.