Roadside Travel Court was organized on July 1, 2024, by Betty Johnson. Betty is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Betty prepared the following income statement for her fourth quarter, which ended June 30, 2025.

Betty suspected that something was wrong with the statement because net income had never exceeded \(\$ 30,000\) in any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other data.
You first look at the trial balance. In addition to the account balances reported above in the income statement, the trial balance contains the following additional selected balances at June 30, 2025.

You then make inquiries and discover the following.
1. Roadside rental revenues include advanced rental payments received for summer occupancy, in the amount of \(\$ 57,000\).
2. There were \(\$ 1,800\) of supplies on hand at June 30 .

3. Prepaid insurance resulted from the payment of a 1-year policy on April 1, 2025.
4. The mail in July 2025 brought the following bills: advertising for the week of June \(24, \$ 110\); repairs made June \(18, \$ 4,450\); and utilities for the month of June, \(\$ 215\).
5. Wage expense is \(\$ 300\) per day. At June 30, 4 days' wages have been incurred but not paid.
6. The note payable is a \(6 \%\) note dated May 1,2025 , and due on July \(31,2025\).
7. Income tax of \(\$ 13,400\) for the quarter is due in July but has not yet been recorded.

Instructions

a. Prepare any adjusting journal entries required at June 30, 2025 .

b. Prepare a correct income statement for the quarter ended June 30, 2025.

c. Explain the generally accepted accounting principles that Betty did not recognize in preparing her income statement and their effect on her results.

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Revenues Roadside Travel Court Income Statement For the Quarter Ended June 30, 2025 Rent revenue Operating expenses Advertising expense Salaries and wages expense Utilities expense Depreciation expense Maintenance and repairs expense Total operating expenses Net income $ 3,800 80,500 900 2,700 4,300 $212,000 92,200 $119,800