Question
Monthly Transactions, Adjustments, and Financial Statements Moonlight Bay Inn is incorporated on January 2, 2017, by its three owners, each of whom contributes $20,000 in
Monthly Transactions, Adjustments, 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:
January 2: | A Victorian inn is purchased for $50,000 in cash. An appraisal performed on this date indicates that the land is worth $15,000, and the remaining balance of the purchase price is attributable to the house. The owners estimate that the house will have an estimated useful life of 25 years and an estimated salvage value of $5,000. |
January 3: | A two-year, 12%, $30,000 promissory note was signed at Second State Bank. Interest and principal will be repaid 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 furniture has an estimated useful life of ten years and no salvage value. |
January 5: | A 24-month property insurance policy is purchased for $6,000 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 bill is payable within 30 days. |
January 15: | Wages of $4,230 for the first half of the month are paid in cash. |
January 16: | A guest mails the business $980 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. |
January 31: | Cash receipts from operation of the restaurant for the month amount to $6,600. |
January 31: | Each stockholder is paid $200 in cash dividends. |
Assume a 360-day year. When required, do not round your intermediate calculations and round your final answers to the nearest whole dollar.
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: | ||
$fill in the blank 0fc548fecfca00a_2 | ||
fill in the blank 0fc548fecfca00a_4 | ||
Total revenues | $fill in the blank 0fc548fecfca00a_5 | |
Expenses: | ||
$fill in the blank 0fc548fecfca00a_7 | ||
fill in the blank 0fc548fecfca00a_9 | ||
fill in the blank 0fc548fecfca00a_11 | ||
fill in the blank 0fc548fecfca00a_13 | ||
fill in the blank 0fc548fecfca00a_15 | ||
fill in the blank 0fc548fecfca00a_17 | ||
fill in the blank 0fc548fecfca00a_19 | ||
fill in the blank 0fc548fecfca00a_21 | ||
fill in the blank 0fc548fecfca00a_23 | ||
Total expenses | fill in the blank 0fc548fecfca00a_24 | |
$fill in the blank 0fc548fecfca00a_26 |
4b. Prepare a statement of retained earnings for the month ended January 31, 2017. If an amount is zero, enter "0".
Moonlight Bay Inn | |
Statement of Retained Earnings | |
For the Month Ended January 31, 2017 | |
$fill in the blank ce30aff3d00af97_2 | |
fill in the blank ce30aff3d00af97_4 | |
fill in the blank ce30aff3d00af97_6 | |
$fill in the blank ce30aff3d00af97_8 |
4c. Prepare a balance sheet at January 31, 2017.
Moonlight Bay Inn | |||
Balance Sheet | |||
January 31, 2017 | |||
Assets | |||
Current assets: | |||
$fill in the blank aeceb5fb7f84030_2 | |||
fill in the blank aeceb5fb7f84030_4 | |||
fill in the blank aeceb5fb7f84030_6 | |||
Total current assets | $fill in the blank aeceb5fb7f84030_7 | ||
Property, plant, and equipment: | |||
$fill in the blank aeceb5fb7f84030_9 | |||
fill in the blank aeceb5fb7f84030_11 | $fill in the blank aeceb5fb7f84030_12 | ||
$fill in the blank aeceb5fb7f84030_14 | |||
fill in the blank aeceb5fb7f84030_16 | fill in the blank aeceb5fb7f84030_17 | ||
fill in the blank aeceb5fb7f84030_19 | |||
Total property, plant, and equipment | fill in the blank aeceb5fb7f84030_20 | ||
Total assets | $fill in the blank aeceb5fb7f84030_21 | ||
Liabilities | |||
Current liabilities: | |||
$fill in the blank aeceb5fb7f84030_23 | |||
fill in the blank aeceb5fb7f84030_25 | |||
fill in the blank aeceb5fb7f84030_27 | |||
fill in the blank aeceb5fb7f84030_29 | |||
fill in the blank aeceb5fb7f84030_31 | |||
fill in the blank aeceb5fb7f84030_33 | |||
Total current liabilities | $fill in the blank aeceb5fb7f84030_34 | ||
Long-term debt: | |||
fill in the blank aeceb5fb7f84030_36 | |||
Total liabilities | $fill in the blank aeceb5fb7f84030_37 | ||
Stockholders' Equity | |||
$fill in the blank aeceb5fb7f84030_39 | |||
fill in the blank aeceb5fb7f84030_41 | |||
Total stockholders' equity | fill in the blank aeceb5fb7f84030_42 | ||
Total liabilities and stockholders' equity | $fill in the blank aeceb5fb7f84030_43 |
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.
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