Question
Monthly Transactions, Adjustments, and Financial Statements Moonlight Bay Inn is incorporated on January 2, 2014, 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, 2014, 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, 2016. |
| 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.
Required:
1. Identify and analyze each of the preceding transactions.
January 2: Each of three owners contribute $20,000 in cash in exchange for shares of stock in the business.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 1 |
| Accounts | - Select your answer -Cash Increase, Capital Stock IncreaseCash Increase, Capital Stock DecreaseCash Decrease, Capital Stock IncreaseCash Decrease, Capital Stock DecreaseCorrect 2 of Item 1 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 1 |
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 | ||||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | |||||||
| - Select your answer -Accounts ReceivableCapital StockCashRetained EarningsRestaurant RevenueNo EntryCorrect 1 of Item 2 | - Select your answer -Accounts PayableAccounts ReceivableCapital StockCashSales RevenueNo EntryCorrect 3 of Item 2 | - Select your answer -Accounts ReceivableCapital StockCashRetained EarningsRestaurant RevenueNo EntryCorrect 5 of Item 2 | - Select your answer -Accounts PayableCapital StockCashRetained EarningsRestaurant RevenueNo EntryCorrect 7 of Item 2 | - Select your answer -Accounts ReceivableCapital StockCashRetained EarningsRestaurant RevenueNo EntryCorrect 9 of Item 2 | |||||||||||
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.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 3 |
| Accounts | - Select your answer -Land Increase, House Increase, Cash DecreaseLand Increase, House Decrease, Cash DecreaseLand Decrease, House Increase, Cash DecreaseLand Decrease, House Decrease, Cash DecreaseCorrect 2 of Item 3 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 3 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts PayableFurnitureLandNotes PayableRetained EarningsNo EntryCorrect 1 of Item 4 | - Select your answer -Accounts ReceivableCashHouseInterest ExpenseNotes PayableNo EntryCorrect 3 of Item 4 | - Select your answer -Accounts ReceivableCashHouseInterest ExpenseNotes PayableNo EntryCorrect 6 of Item 4 | - Select your answer -Accounts PayableFurnitureLandNotes PayableRetained EarningsNo EntryCorrect 8 of Item 4 | |||||||||||
| - Select your answer -Accounts ReceivableHouseInterest ExpenseNotes ReceivableNotes PayableNo EntryCorrect 11 of Item 4 | - Select your answer -Capital StockCashHouseLandNotes PayableNo EntryCorrect 13 of Item 4 | - Select your answer -Capital StockCashHouseLandNotes PayableNo EntryCorrect 16 of Item 4 | - Select your answer -Accounts ReceivableHouseInterest ExpenseNotes ReceivableNotes PayableNo EntryCorrect 18 of Item 4 | |||||||||||
| - Select your answer -Accounts ReceivableCapital StockCashNotes PayableRetained EarningsNo EntryCorrect 21 of Item 4 | - Select your answer -CashFurnitureLandNotes PayableRetained EarningsNo EntryCorrect 23 of Item 4 | - Select your answer -CashFurnitureLandNotes PayableRetained EarningsNo EntryCorrect 26 of Item 4 | - Select your answer -Accounts ReceivableCapital StockCashNotes PayableRetained EarningsNo EntryCorrect 28 of Item 4 | |||||||||||
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, 2016.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 5 |
| Accounts | - Select your answer -Cash Increase, Notes Payable IncreaseCash Increase, Notes Payable DecreaseCash Decrease, Notes Payable IncreaseCash Decrease, Notes Payable DecreaseCorrect 2 of Item 5 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 5 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts PayableAccounts ReceivableCashNotes PayableNotes ReceivableNo EntryCorrect 1 of Item 6 | - Select your answer -Accounts PayableCashInterest PayableNotes PayableRetained EarningsNo EntryCorrect 3 of Item 6 | - Select your answer -Accounts PayableAccounts ReceivableCashNotes PayableNotes ReceivableNo EntryCorrect 6 of Item 6 | - Select your answer -Accounts PayableCashInterest PayableNotes PayableRetained EarningsNo EntryCorrect 8 of Item 6 | |||||||||||
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.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 7 |
| Accounts | - Select your answer -Furniture Increase, Cash IncreaseFurniture Increase, Cash DecreaseFurniture Decrease, Cash IncreaseFurniture Decrease, Cash DecreaseCorrect 2 of Item 7 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 7 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts ReceivableDepreciation ExpenseFurnitureHouseNotes PayableNo EntryCorrect 1 of Item 8 | - Select your answer -Accounts PayableAccumulated Depreciation-FurnitureCashFurnitureNotes PayableNo EntryCorrect 3 of Item 8 | - Select your answer -Accounts PayableAccumulated Depreciation-FurnitureCashFurnitureNotes PayableNo EntryCorrect 6 of Item 8 | - Select your answer -Accounts ReceivableDepreciation ExpenseFurnitureHouseNotes PayableNo EntryCorrect 8 of Item 8 | |||||||||||
| - Select your answer -Accounts ReceivableCashDepreciation ExpenseHouseNotes PayableNo EntryCorrect 11 of Item 8 | - Select your answer -Accounts PayableAccumulated Depreciation-FurnitureCashFurnitureNotes PayableNo EntryCorrect 13 of Item 8 | - Select your answer -Accounts PayableAccumulated Depreciation-FurnitureCashFurnitureNotes PayableNo EntryCorrect 16 of Item 8 | - Select your answer -Accounts ReceivableCashDepreciation ExpenseHouseNotes PayableNo EntryCorrect 18 of Item 8 | |||||||||||
January 5: A 24-month property insurance policy is purchased for $6,000 in cash.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 9 |
| Accounts | - Select your answer -Prepaid Insurance Increase, Cash IncreasePrepaid Insurance Increase, Cash DecreasePrepaid Insurance Decrease, Cash IncreasePrepaid Insurance Decrease, Cash DecreaseCorrect 2 of Item 9 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 9 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts ReceivableAccounts PayableCapital StockInsurance ExpensePrepaid InsuranceNo EntryCorrect 1 of Item 10 | - Select your answer -Accounts PayableCashInsurance ExpenseNotes PayablePrepaid InsuranceNo EntryCorrect 3 of Item 10 | - Select your answer -Accounts ReceivableAccounts PayableCapital StockInsurance ExpensePrepaid InsuranceNo EntryCorrect 6 of Item 10 | - Select your answer -Accounts PayableCashInsurance ExpenseNotes PayablePrepaid InsuranceNo EntryCorrect 8 of Item 10 | |||||||||||
| - Select your answer -Accounts ReceivableAccounts PayableCashCapital StockInsurance ExpenseNo EntryCorrect 11 of Item 10 | - Select your answer -Accounts PayableCashInsurance ExpenseNotes PayablePrepaid InsuranceNo EntryCorrect 13 of Item 10 | - Select your answer -Accounts ReceivableAccounts PayableCashCapital StockInsurance ExpenseNo EntryCorrect 16 of Item 10 | - Select your answer -Accounts PayableCashInsurance ExpenseNotes PayablePrepaid InsuranceNo EntryCorrect 18 of Item 10 | |||||||||||
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.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 11 |
| Accounts | - Select your answer -Cash Increase, Advertising Expense IncreaseCash Increase, Advertising Expense DecreaseCash Decrease, Advertising Expense IncreaseCash Decrease, Advertising Expense DecreaseCorrect 2 of Item 11 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 11 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Advertising ExpenseAccounts ReceivableCashPrepaid AdvertisingRetained EarningsNo EntryCorrect 1 of Item 12 | - Select your answer -Accounts PayableAdvertising ExpenseCashNotes PayablePrepaid AdvertisingNo EntryCorrect 3 of Item 12 | - Select your answer -Accounts PayableAdvertising ExpenseCashNotes PayablePrepaid AdvertisingNo EntryCorrect 6 of Item 12 | - Select your answer -Advertising ExpenseAccounts ReceivableCashPrepaid AdvertisingRetained EarningsNo EntryCorrect 8 of Item 12 | |||||||||||
January 7: Cleaning supplies are purchased on account for $950. The bill is payable within 30 days.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 13 |
| Accounts | - Select your answer -Cleaning Supplies Increase, Accounts Payable IncreaseCleaning Supplies Increase, Accounts Payable DecreaseCleaning Supplies Decrease, Accounts Payable IncreaseCleaning Supplies Decrease, Accounts Payable DecreaseCorrect 2 of Item 13 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 13 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts ReceivableCashCleaning SuppliesHouseNotes PayableNo EntryCorrect 1 of Item 14 | - Select your answer -Accounts PayableCashCleaning Supplies ExpenseCleaning SuppliesRetained EarningsNo EntryCorrect 3 of Item 14 | - Select your answer -Accounts PayableCashCleaning Supplies ExpenseCleaning SuppliesRetained EarningsNo EntryCorrect 6 of Item 14 | - Select your answer -Accounts ReceivableCashCleaning SuppliesHouseNotes PayableNo EntryCorrect 8 of Item 14 | |||||||||||
January 15: Wages of $4,230 for the first half of the month are paid in cash.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 15 |
| Accounts | - Select your answer -Cash Increase, Wages Expense IncreaseCash Increase, Wages Expense DecreaseCash Decrease, Wages Expense IncreaseCash Decrease, Wages Expense DecreaseCorrect 2 of Item 15 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 15 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts PayableCashRevenue from Rental of RoomsWages ExpenseWages PayableNo EntryCorrect 1 of Item 16 | - Select your answer -Accounts PayableCashDividendsWages ExpenseWages PayableNo EntryCorrect 3 of Item 16 | - Select your answer -Accounts PayableCashDividendsWages ExpenseWages PayableNo EntryCorrect 6 of Item 16 | - Select your answer -Accounts PayableCashRevenue from Rental of RoomsWages ExpenseWages PayableNo EntryCorrect 8 of Item 16 | |||||||||||
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.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 17 |
| Accounts | - Select your answer -Cash Increase, Rent Received in Advance IncreaseCash Increase, Rent Received in Advance DecreaseCash Decrease, Rent Received in Advance IncreaseCash Decrease, Rent Received in Advance DecreaseCorrect 2 of Item 17 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 17 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts PayableCashPrepaid RentRent Received in AdvanceRent RevenueNo EntryCorrect 1 of Item 18 | - Select your answer -CashPrepaid RentRent Received in AdvanceRent ExpenseRent RevenueNo EntryCorrect 3 of Item 18 | - Select your answer -CashPrepaid RentRent Received in AdvanceRent ExpenseRent RevenueNo EntryCorrect 6 of Item 18 | - Select your answer -Accounts PayableCashPrepaid RentRent Received in AdvanceRent RevenueNo EntryCorrect 8 of Item 18 | |||||||||||
January 31: Cash receipts from rentals of rooms for the month amount to $8,300.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 19 |
| Accounts | - Select your answer -Cash Increase, Revenue from Rental of Rooms IncreaseCash Increase, Revenue from Rental of Rooms DecreaseCash Decrease, Revenue from Rental of Rooms IncreaseCash Decrease, Revenue from Rental of Rooms DecreaseCorrect 2 of Item 19 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 19 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts ReceivableCashPrepaid RentRent Received in AdvanceRevenue from Rental of RoomsNo EntryCorrect 1 of Item 20 | - Select your answer -Accounts PayableCashRent ExpenseRent Received in AdvanceRevenue from Rental of RoomsNo EntryCorrect 3 of Item 20 | - Select your answer -Accounts PayableCashRent ExpenseRent Received in AdvanceRevenue from Rental of RoomsNo EntryCorrect 6 of Item 20 | - Select your answer -Accounts ReceivableCashPrepaid RentRent Received in AdvanceRevenue from Rental of RoomsNo EntryCorrect 8 of Item 20 | |||||||||||
January 31: Cash receipts from operation of the restaurant for the month amount to $6,600.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 21 |
| Accounts | - Select your answer -Cash Increase, Restaurant Revenue IncreaseCash Increase, Restaurant Revenue DecreaseCash Decrease, Restaurant Revenue IncreaseCash Decrease, Restaurant Revenue DecreaseCorrect 2 of Item 21 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 21 |
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 | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | ||||||
| - Select your answer -Accounts ReceivableCashNotes ReceivableRestaurant RevenueRent Received in AdvanceNo EntryCorrect 1 of Item 22 | - Select your answer -Accounts ReceivableAccounts PayableCashRestaurant RevenueRetained EarningsNo EntryCorrect 3 of Item 22 | - Select your answer -Accounts ReceivableAccounts PayableCashRestaurant RevenueRetained EarningsNo EntryCorrect 6 of Item 22 | - Select your answer -Accounts ReceivableCashNotes ReceivableRestaurant RevenueRent Received in AdvanceNo EntryCorrect 8 of Item 22 | |||||||||||
January 31: Each stockholder is paid $200 in cash dividends.
| Activity | - Select your answer -OperatingInvestingFinancingCorrect 1 of Item 23 |
| Accounts | - Select your answer -Cash Increase, Dividends IncreaseCash Increase, Dividends DecreaseCash Decrease, Dividends IncreaseCash Decrease, Dividends DecreaseCorrect 2 of Item 23 |
| Statement(s) | - Select your answer -Balance Sheet onlyIncome Statement onlyBalance Sheet and Income StatementCorrect 3 of Item 23 |
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 | ||||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenues | Expenses | = | Net Income | |||||||
| - Select your answer -Capital StockCashDividends PayableDividendsRetained EarningsNo EntryCorrect 1 of Item 24 | - Select your answer -Accounts PayableCashDividends PayableDividendsIncome SummaryNo EntryCorrect 3 of Item 24 | - Select your answer -Capital StockCashDividends PayableDividendsRetained EarningsNo EntryCorrect 5 of Item 24 | - Select your answer -Accounts PayableCashDividends PayableDividendsIncome SummaryNo EntryCorrect 7 of Item 24 | - Select your answer -Capital StockCashDividends PayableDividendsRetained EarningsNo EntryCorrect 9 of Item 24 | |||||||||||
2. Prepare a list of accounts and their balances for Moonlight Bay at January 31, 2014. Reflect the recurring transactions for the month of January but not the necessary month-end adjustments.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Accounting An Introduction To Concepts Methods And Uses
Authors: Sidney Davidson, Roman L. Weil, Clyde P. Stickney
2nd Edition
0030452961, 978-0030452963
