Acct 2200-004 S17 Accounting Information Systems Practice Set

Pinstripes Rental Suites, Inc., was organized on January 1, 2016 and below is the balance sheet after the first month of operation.

Pinstripes Suites Inc.Balance SheetAs of January 31, 2016

Cash 22,000

Prepaid Insurance 600

Supplies 2,500

Land 55,000

Building 25,000

Furniture 15,000

Total Assets 120,100

Accounts Payable 6,500

Unearned Revenue 1,200

Interest Payable 300 Wages Payable 2,200

Notes Payable 30,000

Total Liabilities 40,200 C

ontributed Capital 55,000

Retained Earnings 24,900

Total Equity 79,900

Total Liabilities

Equity 120,100

February 2016 Transactions Use the January balance sheet to create the opening balances, then record the following transactions for the month of February.

February 2: Pinstripes Suites pre-paid $300 cash for an ad that will run in the newspaper for each of the next 6 months beginning March 1, 2016.

February 3: Stock was issued in the amount of $10,000 stock for cash.

February 4: Additional furniture for the inn is purchased at a cost of $5,000 in cash.

February 6: Pinstripes Suites pays $250 for the utilities on the inn for the month of February.

February 14: A two-year, 6%, $50,000 promissory note was signed at the Second State Bank. Interest and principal will be repaid on the maturity date in 2018.

February 15: Wages of $3,500 for the first half of February and last half of January (i.e. accrued in January) are paid in cash. February 16: Pinstripes Suites paid vendors in full for items purchased in January on account.

February 18: A guest mails Pinstripes Suites $1,000 in cash in full payment for a room to be rented for two weeks. The guest plans to stay at the inn during the last week of February and the first week of March.

February 28: Receipts from rentals of rooms (in addition to the $1000 above) for the month amount to $25,000, $6,000 of which was received in cash and the remainder will be collected next month when the credit cards settle.

a. The following adjustments will be needed on February 28, 2016: a. Interest on the promissory note. Remember, interest rates are stated on an annual basis and you should calculate interest for one month. Accrue both interest on the note borrowed in January (at 12%) and the additional amount borrowed in February (for half a month).

b. Recognition of a month of the expired portion of the insurance it was a two-year policy paid at the end of January for $600.

c. Recognition of the earned portion of the guest's deposit. In addition to the amount received on February16 of which a portion was earned, the remainder of unearned revenue from January was earned the first week of February.

d. Wages earned during the second half of February amount to $2,100 and will be paid in March.

e. Cleaning supplies on hand on February 28 amount to $1,100.

f. A cable bill for February amounts to $500 and is payable by March 5.

g. The building and furniture purchased in January were bought on the last day of the month and therefore not depreciated in January. February will be the first month of depreciation for all fixed assets. Furniture has a 10 year life and the Building has a 20 year useful life. Using the straight-line method of depreciation record the depreciation expense on these fixed assets.

Required:

1. Record all February transactions in journal format

2. Prepare an unadjusted trial balance

3. Record all adjusting entries in journal format.

4. Prepare an adjusted trial balance

5. Prepare all four financial statements required by GAAP for the month of February for Pinstripes Suites, Inc. Note: The balance sheet should be in a classified format and prepare the statement of cash flows using the direct method. Use Excel and link all transactions from the trial balance to and between statements,

6. Prepare the month-end closing entries

7. Calculate the following: a. Working Capital Ratio b. Current Ratio c. Times Interest Earned