Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 38

Transactions and income statement
Cory Neece is planning to manage and operate Eagle Caddy Service at Canyon Lake Golf and Country Club during June through August 2016. Cory will rent a small maintenance building from the country club for $500 per month and will offer caddy services, including cart rentals, to golfers. Cory has had no formal training in record keeping.
Cory keeps notes of all receipts and expenses in a shoe box. An examination of Cory's shoe box records for June revealed the following:


Cory has asked you several questions concerning his financial affairs to date, and he has asked you to assist with his record keeping and reporting of financial data.
a. To assist Cory with his record keeping, prepare a chart of accounts that would be appropriate for Eagle Caddy Service.
b. Prepare an income statement for June in order to help Cory assess the profitability of Eagle Caddy Service. For this purpose, the use of T accounts may be helpful in analyzing the effects of each June transaction.
c. Based on Cory's records of receipts and payments, compute the amount of cash on hand on June 30. For this purpose, a T account for cash may be useful.
d. A count of the cash on hand on June 30 totaled $6,175. Briefly discuss the possible causes of the difference between the amount of cash computed in (c) and the actual amount of cash on hand.