Respuesta :
Answer:
1. Prepare journal entries to record each of the preceding transactions.
January 2, 2014, Moonlight Bay Inn is incorporated
Dr Cash 60,000
Cr Common stock 60,000
January 2, 2014, a Victorian Inn is purchased
Dr Land 15,000
Dr Building 35,000
Cr Cash 50,000
January 3, 2014, promissory note signed at bank
Dr Cash 30,000
Cr Notes payable 30,000
January 4, 2014, furniture is purchased
Dr Furniture 15,000
Cr Cash 15,000
January 5, 2014, insurance policy is purchased
Dr prepaid insurance 6,000
Cr cash 6,000
January 6, 2014, advertisement is placed in the local newspaper
Dr Advertising expense 450
Cr Cash 450
January 7, 2014, cleaning supplies purchased on account
Dr Cleaning supplies 950
Cr Accounts payable 950
January 15, 2014, wages for first 15 days are paid
Dr Wages expense 4,230
Cr Cash 4,230
January 16, 2014, check received form customer
Dr Cash 980
Cr Unearned revenue 980
January 31, 2014, cash receipts from room rentals are accounted for
Dr Cash 8,300
Cr Rental revenue 8,300
January 31, 2014, cash receipts from restaurant are accounted for
Dr Cash 6,600
Cr Restaurant revenue 6,600
January 31, 2014, dividends are distributed
Dr Retained earnings 600
Cr Dividends payable 600
Dr Dividends payable 600
Cr Cash 600
2. Post each of the journal entries to T accounts.
I used an excel spreadsheet to post the T accounts (attached file).
3. Prepare adjusting journal entries for each of the following transactions as of January 31.
a. Depreciation of the house
depreciation expense per month = $30,000 x 1/25 x 1/12 = $116.67 ≈ $117
Dr Depreciation expense 117
Cr Accumulated depreciation - building 117
b. Depreciation of the furniture
depreciation expense per month = $15,000 x 1/10 x 1/12 = $125
Dr Depreciation expense 125
Cr Accumulated depreciation - furniture 125
c. Interest on the promissory note
interest expense per month = $30,000 x 12% x 28/365 = $276.16 ≈ $276
Dr Interest expense 276
Cr Interest payable 276
d. Recognition of the expired portion of the insurance
insurance per month = $6,000 /24 = $250
Dr insurance expense 250
Cr Prepaid insurance 250
e. Recognition of the earned portion of the guests’ deposit
Dr Unearned revenue 490
Cr Rental revenue 490
f. Wages earned during the second half of January amount to $520 and will be paid on Feb. 3
Dr Wages expense 520
Cr Wages payable 520
g. Cleaning supplies on hand on January 31 amount to $230
cleaning supplies expense = $950 - $230 = $720
Dr Cleaning supplies expense 720
Cr Cleaning supplies 720
h. A utility bill is received amounts to $740 and is payable by Feb. 5
Dr Utilities expense 740
Cr Accounts payable 740
i. Income taxes are to be accrued at a rate of 30% of income before taxes
Dr Income taxes expense
Cr income taxes payable
4. Post each adjusting journal entry to T accounts
I used an excel spreadsheet to post the T accounts (attached file).
5. Prepare the following financial statements: a. Income statement for month ended January 31
Income Statement
Rental revenue $8,790
Restaurant revenue $6,600
Wages expense ($4,750)
Advertising expense ($450)
Depreciation expense ($242)
Insurance expense ($250)
Cleaning supplies expense ($720)
Utilities expense ($740)
EBIT $8,238
Interest expense ($276)
Net income before taxes $7,962
Income taxes ($2,389)
Net income after taxes $5,573
b. Statement of retained earnings for the month ended January 31
Retained earnings at the beginning of the period: $0
Net income: $5,573
Dividends distributed: ($600)
Retained earnings at the end of the period $4,973
c. Balance sheet at January 31
Assets:
Cash $29,600
Prepaid insurance $5,750
Cleaning supplies $230
Furniture $14,875
Land $15,000
Building $34,883
Total Assets: $100,338
Liabilities and Stockholders' Equity:
Accounts payable $1,690
Unearned revenue $490
Wages payable $520
Interest payable $276
Income tax payable $2,389
Notes payable $30,000
Common stock $60,000
Retained earnings $4,973
Total Liabilities and Stockholders' Equity: $100,338
6. What are your reactions to Moonlight’s first month of operations? Is the bank comfortable with the loan it made?
Yes, the bank should be OK with the loan since the Inn was able to make a profit during the first month of operations (something very uncommon).
