Kingspoint Motel maintains its accounting records on the basis of a calendar year. The following information is
Question:
Kingspoint Motel maintains its accounting records on the basis of a calendar year.
The following information is available as a source for adjusting entries at Decem¬
ber 31. LO8
(1) Salaries earned by employees but not yet paid amount to $10,860.
(2) As of December 31 the motel has earned $5,040 rental revenue from current guests who will not be billed until they are ready to check out. (Debit Rent Receivable.)
(3) On December 16, a suite of rooms was rented to a guest for six months at a monthly rental of $1,500. Rent for the first three months was collected in ad¬
vance and credited to Unearned Rental Revenue.
(4) A one-year bank loan in the amount of $90,000 had been obtained on Novem¬
ber 1. No interest has been paid and no interest expense has been recorded. The interest accrued at December 31 is $1,800.
(5) Depreciation on the motel for the year ended December 31 was $43,800.
(6) Depreciation on a station wagon owned by the motel was based on a four-year life. The station wagon had been purchased new on September 1 of the current year at a cost of $9,600.
(7) On December 31, Kingsport Motel entered into an agreement to host the Na¬
tional Building Suppliers Convention in June of next year. The motel expects to earn rental revenue of at least $15,000 from the convention.
Instructions a From the information given above, draft the adjusting entries (including explana¬
tions) required at December 31.
b Assume that all necessary adjusting entries at December 31 have been recorded and that net income for the year is determined to be $300,000. How much net income would have been indicated by the accounting records if the company had failed to make the above adjusting entries? Show computations.
Step by Step Answer:
Accounting The Basis For Business Decisions
ISBN: 9780070415515
5th Edition
Authors: Robert F. Meigs, Walter B Meigs