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Information on adjusting entries: (1) A guest has occupied a deluxe double room with sea view from 25 to 31 December 2019 and no entries
Information on adjusting entries: (1) A guest has occupied a deluxe double room with sea view from 25 to 31 December 2019 and no entries have been made. The total room charges of $56,000 are settled on January 2020. (2) Hotel equipment is depreciated by straight-line method over an estimated useful life of 7 years. (3) The Company borrowed $120,000 by signing a 9-month notes payable with annual interest rate of 4% on 1 May 2019. The principal and the total accrued interest will be due on 31 January 2020. The last adjusting entries was made on 30 September 2019. (4) The Company purchased medical insurance policy for the employees on 1 February 2019. The insurance premium is paid in advance for three months on 1 February, 1 May, 1 August and 1 November (5) On 31 December 2019, the Company signed a contract of $100,000 with a YouTuber to promote the hotel offer in the YouTube channel in January 2020. The payment will be due on 31 January 2020. (6) The accountant estimates that the total income tax expense for the entire year should be $93,600. The amount will be due in mid of April 2020. (7) The unrecorded salaries for employees for December 2019 amounting to $ 55,500 will be paid on 7 January 2020. (8) Unearned revenue showed in the account was related to the cash received in advance from a customer for holding a wedding party in the function room of Relax Hotel. The party was held on 25 December 2019. (9) The Company declared a final dividend of $0.2 per share on 24 December 2019, and then paid all the dividends declared on 31 December 2019. No entries for these transactions have been recorded. Required: (a) Prepare the necessary adjusting journal entries on 31 December 2019 to bring the financial records of Relax Hotel Company up-to-date. Use the account titles given in the Trial Balance where appropriate. Show your workings. Explanations are NOT required. If no adjusting entries are required, state No entry" and name the accounting principle applied. (20 marks) (b) Prepare the income statement for the year ended 31 December 2019, showing breakdown of items under the captions of Revenues, Expenses, Profit before Tax, Profit after Tax. (11 marks)
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