Monthly Transactions, Acustments, and Financial Statements Moonlight Bay Inn is incorporated on January 2, 2017, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month of January anuary 2: A Victorian is purchased for $50,000 in cas, An appraisal performed on this date indicates that the land is worth $15,000, and the remaining wance of the purchase prices attributable to the house. The owners estimate that the house will have an estimated use f 25 years and an estimated salvage value of $5,000 January 3: A two-year, 129, $30,000 promissory note was signed at Second State Bank Interest and principal will be repeld on the maturity date of January 3, 2019 January 4: New furniture for the Inn is purchased at a cost of $15,000 in cash. The future has an estimated useful life of ten years and no salvage value January 5: A 24-month property Insurance policy is purchased for 36,000 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 bilis payable within 30 days. January 15: Wages or $4,230 for the first half of the month are paid in cash. January 10: A guest mais the business 5980 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 receipts from rentals of rooms for the month amount to $8,300. Sanuary 31: Cash receipts from operation of the restaurant for the month amount to $6,000 January 31: Each stockholder is paid $200 in cash dividends Assume a 360-day year. When require, do not round your intermediate calculations and round your final answers to the nearest while dollar Required: 3. Identify and analyze the necessary adjustments for each of the following: a. Depreciation of the house. Use straight line method of depreciation. Activity Accounts statemAMS) How does this entry affect the accounting equation? Ir a mancial statementem is not affected, select "No entry and leave the amountbex bank. If the feet on annancial statement is negative, I., a decrease be sure to enter the answer with a minus sign. Remember: Ir a contra account increase will have the sector decreasing the corresponding mancial Statementem. Balance Sheet Income Statement Stockholders Net Assets Uabilities Equity Revenues Expenses Income Depreciation of the furniture. U straight line method accounting depreciation Activity Accounts Statements How does this entry affect the accounting equation? Ir a mancial statementem is not affected, select "No entry and leave the amount box bank. If the feet on annancial statement is negative, I., a decrease be sure to enter the answer with a minus sign. Remember: ir a contra account is cread, I will have the sector decreasing the corresponding Mancial Statementem. Balance Sheet Income Statement Stockholders' Net Assets Uabilities Equity Revenues Expenses Income C. Interest on the promissory note. ACTIVE Accounts Statements) How does this entry affect the accounting equation? Ir a financial statement item is not affected, select No Entry and leave the amount box blank. If the effect on a financial statement item is negative, I., a decrease, be sure to enter the answer with a minus sign. Balance sheet Income statement Stockholders Assets Llabilities Equity Revenues Expenses Net Income c. Recognition of the expired portion of the insurance Activity Accounts Statements How does this entry affect the accounting equation? Ir a financial statement item is not affected, select "No Entry and leave the amount box blank. If the effect on a financial statement item is negative, I., a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income statement Stockholders Labilities Equity Revenues Expenses Net Income e. Recognition of the earned portion of the guest's deposit. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement Item is negative, le, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Llabilities Equity Revenues Expenses Income f. Wages earned during the second half of January amount to $5,120 and will be paid on February 3. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, L.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Net Stockholders Equity Assets Liabilities Revenues Expenses Income 9. Cleaning supplies on hand on January 31 amount to $230. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, L.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Net Stockholders Equity Assets Llabilities + Revenues Expenses Income h. A gas and electric bill that is received from the city amounts to $740 and is payable by February 5. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement Item is negative, I.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Llabilities Equity Revenues Expenses Income I. Income taxes are to be accrued at a rate of 30% of Income before taxes. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, I.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Liabilities + Equity Revenues Expenses Income 4a. Prepare an income statement for the month ended January 31, 2017. Moonlight Bay Inn Income Statement For the Month Ended January 31, 2017 Revenues: Total revenues Expenses: Total expenses 4b. Prepare a statement of retained earnings for the month ended January 31, 2017. If an amount is zero, enter "o". Moonlight Bay Inn Statement of Retained Earnings For the Month Ended January 31, 2017 4c. Prepare a balance sheet at January 31, 2017 Moonlight Bay Inn Balance Sheet January 31, 2017 Assets Current assets: Total current assets Property, plant, and equipment 0 Total property, plant, and equipment Total assets Llabilities Current liabilities: Total current liabilities Long-term debt: Total abilities stockholders Esute Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity 5. You are the loan officer at Second State Bank. You have made a loan to Moonlight Inn. Upon verifying the financial statements, Which of the statements given below would make you comfortable with the loan you made? a. The Inn has shown a profit, but the balance sheet does not show a strong position. The banker should not be comfortable with the loan made. b. The Inn has shown a profit and the balace sheet shows a strong position. The banker should be comfortable with the loan made. C. The Inn has shown a loss but the balace sheet shows a strong position. The banker should be comfortable with the loan made. d. The Inn has shown a loss and the balace sheet does not show a strong position. The banks should not be comfortable with the loan made. Monthly Transactions, Acustments, and Financial Statements Moonlight Bay Inn is incorporated on January 2, 2017, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month of January anuary 2: A Victorian is purchased for $50,000 in cas, An appraisal performed on this date indicates that the land is worth $15,000, and the remaining wance of the purchase prices attributable to the house. The owners estimate that the house will have an estimated use f 25 years and an estimated salvage value of $5,000 January 3: A two-year, 129, $30,000 promissory note was signed at Second State Bank Interest and principal will be repeld on the maturity date of January 3, 2019 January 4: New furniture for the Inn is purchased at a cost of $15,000 in cash. The future has an estimated useful life of ten years and no salvage value January 5: A 24-month property Insurance policy is purchased for 36,000 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 bilis payable within 30 days. January 15: Wages or $4,230 for the first half of the month are paid in cash. January 10: A guest mais the business 5980 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 receipts from rentals of rooms for the month amount to $8,300. Sanuary 31: Cash receipts from operation of the restaurant for the month amount to $6,000 January 31: Each stockholder is paid $200 in cash dividends Assume a 360-day year. When require, do not round your intermediate calculations and round your final answers to the nearest while dollar Required: 3. Identify and analyze the necessary adjustments for each of the following: a. Depreciation of the house. Use straight line method of depreciation. Activity Accounts statemAMS) How does this entry affect the accounting equation? Ir a mancial statementem is not affected, select "No entry and leave the amountbex bank. If the feet on annancial statement is negative, I., a decrease be sure to enter the answer with a minus sign. Remember: Ir a contra account increase will have the sector decreasing the corresponding mancial Statementem. Balance Sheet Income Statement Stockholders Net Assets Uabilities Equity Revenues Expenses Income Depreciation of the furniture. U straight line method accounting depreciation Activity Accounts Statements How does this entry affect the accounting equation? Ir a mancial statementem is not affected, select "No entry and leave the amount box bank. If the feet on annancial statement is negative, I., a decrease be sure to enter the answer with a minus sign. Remember: ir a contra account is cread, I will have the sector decreasing the corresponding Mancial Statementem. Balance Sheet Income Statement Stockholders' Net Assets Uabilities Equity Revenues Expenses Income C. Interest on the promissory note. ACTIVE Accounts Statements) How does this entry affect the accounting equation? Ir a financial statement item is not affected, select No Entry and leave the amount box blank. If the effect on a financial statement item is negative, I., a decrease, be sure to enter the answer with a minus sign. Balance sheet Income statement Stockholders Assets Llabilities Equity Revenues Expenses Net Income c. Recognition of the expired portion of the insurance Activity Accounts Statements How does this entry affect the accounting equation? Ir a financial statement item is not affected, select "No Entry and leave the amount box blank. If the effect on a financial statement item is negative, I., a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income statement Stockholders Labilities Equity Revenues Expenses Net Income e. Recognition of the earned portion of the guest's deposit. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement Item is negative, le, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Llabilities Equity Revenues Expenses Income f. Wages earned during the second half of January amount to $5,120 and will be paid on February 3. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, L.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Net Stockholders Equity Assets Liabilities Revenues Expenses Income 9. Cleaning supplies on hand on January 31 amount to $230. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, L.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Net Stockholders Equity Assets Llabilities + Revenues Expenses Income h. A gas and electric bill that is received from the city amounts to $740 and is payable by February 5. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement Item is negative, I.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Llabilities Equity Revenues Expenses Income I. Income taxes are to be accrued at a rate of 30% of Income before taxes. Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, I.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Liabilities + Equity Revenues Expenses Income 4a. Prepare an income statement for the month ended January 31, 2017. Moonlight Bay Inn Income Statement For the Month Ended January 31, 2017 Revenues: Total revenues Expenses: Total expenses 4b. Prepare a statement of retained earnings for the month ended January 31, 2017. If an amount is zero, enter "o". Moonlight Bay Inn Statement of Retained Earnings For the Month Ended January 31, 2017 4c. Prepare a balance sheet at January 31, 2017 Moonlight Bay Inn Balance Sheet January 31, 2017 Assets Current assets: Total current assets Property, plant, and equipment 0 Total property, plant, and equipment Total assets Llabilities Current liabilities: Total current liabilities Long-term debt: Total abilities stockholders Esute Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity 5. You are the loan officer at Second State Bank. You have made a loan to Moonlight Inn. Upon verifying the financial statements, Which of the statements given below would make you comfortable with the loan you made? a. The Inn has shown a profit, but the balance sheet does not show a strong position. The banker should not be comfortable with the loan made. b. The Inn has shown a profit and the balace sheet shows a strong position. The banker should be comfortable with the loan made. C. The Inn has shown a loss but the balace sheet shows a strong position. The banker should be comfortable with the loan made. d. The Inn has shown a loss and the balace sheet does not show a strong position. The banks should not be comfortable with the loan made