Question

I am stuck on adjusting the entires. Please see below.

Moonlight Bay Inn is incorporated on January 2, 2014, by its three owners, each of whom contributes $20,000 in cash inexchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month ofJanuary:

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 the 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 incash. The furniture has an estimated useful life of 10 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 receiptsfrom rentals of rooms for the month amount to $8,300.

January 31: Cash receiptsfrom operation of the restaurant for the month amount to $6,600.

January 31:. Each stockholder is paid $200 in cash dividends.

Requirement #4: Prepare adjusting entries using the following information in the General Journal below. Show your calculations!
a) Depreciation of the house
b) Depreciation of the furniture
c) Interest on the promissory note
d) Recognition of the expired portion of the insurance
e) Recognition of a portion of the guest's deposit
f) Wages earned during the second half of January amount to $5,120 and will be paid on February 3.
g) Cleaning supplies on hand on January 31 amount to $230.
h) A gas and electric bill that is received from the city amounts to $740 and is payable by February 5.
i) Income taxes are to be accrued at a rate of 30% of income before taxes.

Answer 1

Answer:

Date	Account title and Explanation	Debit	Credit
Jan 31	Depreciation expense-house [($35,000-$5,000)/25 years] x (1/12)	$100
	Accumualted depreciation-house		$100
	[To record depreciation expense on house]
Jan 31	Depreciation expense-furniture [$15,000-0)/10 years] x (1/12)	$125
	Accumulated depreciation-furniture		$125
	[To record depreciation expense on furniture]
Jan 31	Interest expense [$30,000 x 12% x (1/12)]	$300
	Interest payable		$300
	[To record accrued interest expesne]
Jan 31	Insurance expense [$6,000/24]	$250
	Prepaid insurance		$250
	[To record interest expense]
Jan 31	Unearned rent revenue	$490
	Rent Revenue [$980/2]		$490
	[To record revenue recognized from unearned revenue]
Jan 31	Wages expense	$5,120
	Wages payable		$5,120
	[To record accrued wages expense]
Jan 31	Cleaning supplies expense [950-230]	$720
	Cleaning supplies		$720
	[To record cleaning supplies expense]
Jan 31	Utilities expense	$740
	Utilities payable		$740
	[To record accrued gas and electricity expense]
Jan 31	Income tax expense [$3,355* x 30%]	$1,007
	Income tax payable		$1,007
	[To record interest expense]

*Profit before income taxes:

Revenues:
Rental revenue (8300+490)		$8,790
Restaurent revenue		$6,600
Total revenues		$15,390
Expenses:
Advertising expense	$450
Wages expense [4230+5120]	$9,350
Depreciation expense-House	$100
Depreciation expense-Furniture	$125
Interest expense	$300
Insurance expense	$250
Cleaning supplies expense	$720
Utilities expesne	$740
Total expenses		$12,035
Profit before income taxes		$3,355