Case Summary: Waltham Oil and Lubes Inc.

Mr. Frank Knight has started a vehicle servicing business by putting a capital of $50000 on 1st May. For that he went into an agreement with National Oil and Lubes centers Inc. wherein he will use the National’s workshop facility and will purchase all the equipment and inventory from them. Of the $40000 deposit which he paid to National as a part of agreement, $25200 were deducted for the equipment costing $75000, remaining money to be paid in terms of non-interest bearing note worth $830 a month. The equipment had a useful life of 5 years Secondly inventory costing $6320 was deducted from the deposit along with other operating supplies of $4130. Also the lease and operating agreement demanded Mr. Frank to pay rent of $1500 for each month along with $10 for every vehicle serviced by him. Rent for the month of May was deducted from the deposit and the remaining ($2850) was kept with National as caution deposit. Also as an investment he purchased furniture worth $6000 with useful life of 10 years. He also purchased an insurance policy worth $1200 with coverage period of 1 year.

During the period he serviced 2340 vehicles with revenue of $105300 in cash and accounts receivables of $1070. Also he used to give his place for night parking to the neighboring people, from which he earned $3300. For carrying out the business he incurred a utilities bill of $1700, employee salary of $34560 and Miss. Expense of $6600. Also during this period he purchased an additional inventory of $8230. Also he owned employee salary of $2100 and utility companies $350 during this period. Also he has withdrawn $4500 from the company account for his personal expense.

At the end of July he was left with the following assets and liabilities

Assets

1. Cash: $26920

2. Deposit with National: $2850

3. Furniture: $5850

4.