CHIP-SHOT DRIVING RANGE

A business case
presented to the
Accountancy Department

In Partial fulfillment
of the course requirements
in ACCTBA1

Damian, RJ
De Leon, Gerard
Faderguya, Mark
Lopez, Maria Ayessa

Section K40
December 8, 2014
 I. Introduction
Lucy and Nick Lars, opened a driving range on March 1, 2014 investing P800,000 of their cash
savings in the business. Their expenses for the first month of operations amounted to P90,000.
Lucy and Nick also had withdrawals(32,000) for their living expenses. On March 31, the balance
in the companys bank account was P604,000. Lucy and Nick thought they had a pretty good
first month of operations. But their estimates of profitability ranged from a loss of P 196,000 to
net income of P66,000.

II. Discussion
1. How could the Lars have concluded that the business operated at a loss of P 196,000?
Was this a valid basis on which to determine net income?

Lars deducted his companys remaining cash of 604,000 to their initial investment of 800,000 to
get 196,000 as his estimated loss.

2. How could the Lars have concluded that the business operated at a net income of
P66,000? (Hint: Prepare a balance sheet at March 31.) Was this a valid basis on which to
determine net income?
Lars concluded a net income of P66,000 he did not add the golf balls and equipment amounting
to P32,000 to his property, plant and equipment. This is not a valid basis to determine net
income. There is also no depreciation in their Property, Plant and Equipment.

Lars Chip-Shot Driving Range

Statement of Financial Position
March 31, 2014
Current Assets
Cash P604,000
Non-Current Assets
Property Plant and Equipment 240,000
Total Assets 844,000

Current Liabilities P 10,000

Owners Equity 768,000

Net Income 66,000

844,000
3. Without preparing an income statement, determine the actual net income for March?

Total Assets 876,000

Total Liability (10,000)
Total Equity (768,000)
Retained Earnings P98,000

4. What was the revenue earned in March?

The revenue for the month of march amounted to P 188,000.
Net Income P98,000
Add: Expenses 90,000
Revenue P 188,000