eBook Monthly Transactions, Adjustments, and Financial Statements Moonlight Bay Inn is incorporated on January 2, 2017, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month of January: January 2: A Victorian inn is purchased for $50,000 in cash. An appraisal performed on this date indicates that the land is worth $15,000, and the remaining balance of the purchase price is attributable to the house. The owners estimate that the house will have an estimated useful life of 25 years and an estimated salvage value of $5,000. January 3: A two-year, 12%, $30,000 promissory note was signed at Second State Bank. Interest and principal will be repaid on the maturity date of January 3, 2019. January 4: New furniture for the inn is purchased at a cost of $15,000 in cash. The furniture has an estimated useful life of ten years and no salvage value. January 5: A 24-month property insurance policy is purchased for $6,000 in cash. January 6: An advertisement for the inn is placed in the local newspaper. Moonlight Bay pays $450 cash for the ad, which will run in the paper throughout January. January 7: Cleaning supplies are purchased on account for $950. The bill is payable within 30 days. January 15: Wages of $4,230 for the first half of the month are paid in cash. January 16: A guest mails the business $980 in cash as a deposit for a room to be rented for two weeks. The guest plans to stay at the inn during the last week of January and the first week of February. January 31: Cash receipts from rentals of rooms for the month amount to $8,300. January 31: Cash receipts from operation of the restaurant for the month amount to $6,600. January 31: Each stockholder is paid $200 in cash dividends. Assume a 360-day year. When required, do not round your intermediate calculations and round your final answers to the nearest whole dollar. Required: 3. Identify and analyze the necessary adjustments for each of the following: a. Depreciation of the house. Use straight line method of depreciation. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
-
eBook
Monthly Transactions, Adjustments, and Financial Statements
Moonlight Bay Inn is incorporated on January 2, 2017, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month of January:
January 2: A Victorian inn is purchased for $50,000 in cash. An appraisal performed on this date indicates that the land is worth $15,000, and the remaining balance of the purchase price is attributable to the house. The owners estimate that the house will have an estimated useful life of 25 years and an estimated salvage value of $5,000. January 3: A two-year, 12%, $30,000 promissory note was signed at Second State Bank. Interest and principal will be repaid on the maturity date of January 3, 2019. January 4: New furniture for the inn is purchased at a cost of $15,000 in cash. The furniture has an estimated useful life of ten years and no salvage value. January 5: A 24-month property insurance policy is purchased for $6,000 in cash. January 6: An advertisement for the inn is placed in the local newspaper. Moonlight Bay pays $450 cash for the ad, which will run in the paper throughout January. January 7: Cleaning supplies are purchased on account for $950. The bill is payable within 30 days. January 15: Wages of $4,230 for the first half of the month are paid in cash. January 16: A guest mails the business $980 in cash as a deposit for a room to be rented for two weeks. The guest plans to stay at the inn during the last week of January and the first week of February. January 31: Cash receipts from rentals of rooms for the month amount to $8,300. January 31: Cash receipts from operation of the restaurant for the month amount to $6,600. January 31: Each stockholder is paid $200 in cash dividends. Assume a 360-day year. When required, do not round your intermediate calculations and round your final answers to the nearest whole dollar.
Required:
3. Identify and analyze the necessary adjustments for each of the following:
a.
Depreciation of the house. Usestraight line method of depreciation.How does this entry affect the
accounting equation ?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
