Financial Condition
At the beginning of the summer, Jack Wells was looking for a way to earn money to pay for his college tuition in the fall. He decided to start a lawn service business in his neighborhood. To get the business started, Jack used $6,000 from his savings account to open a checking account for his new business, Elegant Lawn Care. He purchased two used power mowers and various lawn care tools for $2,000, and paid $3,600 for a second-hand truck to transport the mowers.
Several of his neighbors hired him to cut their grass on a weekly basis. He sent these customers monthly bills. By the end of the summer, they had paid him $1,200 in cash and owed him another $2,300. Jack also cut grass on an as-needed basis for other neighbors who paid him $1,000.
During the summer, Jack spent $400 for gasoline for the truck and mowers. He paid $1,000 to a friend who helped him on several occasions. An advertisement in the local paper cost $200. Now, at the end of the summer, Jack is concerned because he has only $1,000 left in his checking account. He says, “I worked hard all summer and have only $1,000 to show for it. It would have been better to leave the money in the bank.”
Explain to Jack whether or not he is “better off” than he was at the beginning of the summer. Organize the data using T-accounts.
