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.

Munthly Transactions, Adjustments, and Financial Statements Moonlight Bey 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 nu sevege value . January 5: A 24-month property insurance policy is purchased for $6,000 in cash. naman ay naman ang 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. - - - - - en peper January 7: Cleaning Supplies are purchased on account for $950. The bil is peyable 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 $990 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, 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 Operating Accounts Accumulated Depreciation-House Increase, Depreciation Expense-House Increase Statement(s) Balance Sheet and Income Statement Fanchuck Check My W 1) Determine activity 1a) Financing activities are transactions other than payment of interest) inolving borrowing trom creditors or repay ng creditors. This also includes transactions with the company's owners. Businesses borrow money or raise money from scling of their slock. 19) Isting activities are obtaining money by biking up operation of purchasing investment products such a kocka, bonde and Annuities 1c) Operating activities are the sale of products and/or services, and the costs nourred to operate a business 2) Determine financial statement Accounts affected balance sheet or income statement. Derermina counts and amount of increased 3) Balance Sheet accuunts: Assels - Liabilities Stockholders' Equity Income Statement accounts: Revenues - Expenses = Net Income. Equsions must stay in balance 4) The adjustment to recognize depreciation is conceptually the same as the custment for Prepald Insurance. The asset account is reduced and an expense is recognized. As the Insurance expres, the criginal amount is reduced. With tangible assets, as the cost is allocated over the expected life, the whole of the asset remains intest Contre-accounts are used to record all of the expense write-ot, depreciation wapense, in an account celedescumulated depreciation that represents the running bol of expense for the set Contra-accounts function opposite the associated account 5) Calculate depreciable cost. Subtract salvage value from asset cost ) Dide depreciable coat hy of (300 months) for depreciation expand 7) This is a deferred expense, cash paid before expense is incurred. Unexpired costs are assets. As costs expire, they become expense. 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 itern is negative, ie, a decrease, be sure to enter the answer with a minus sign. Rernernber: if a contra account is increased, it will have the effect of decreasing the curresponding financial statement itern Balance Sheet Income Statement Net Stockholders Equity Assets Liabilities Revenues Income Expenses Depreciation Expense-House Accumulated Depreciation-House -1007 No Entry X No Entry 0 100 -100 Tachok check My Wak Partially correct b. Depreciation of the furniture. Use straight line method accounting depredation. Activity Operating Accounts Accumulated Depreciation-Furniture Increase, Depreciation Expense-Furniture Increase Statement(s) Balance Sheet and Income Statement Feedback Check My Work 11 Determine activity 1Aj Financing activities are transactions father than payment of interest involving bormwing from creditors or repaying creditors. This also includes transactions with the company's owners. Businesses harrow many ar raise maney from seling of their stock. 1b) Investing activities are using money by building up operations or purchasing iestment products such as locks, bonds and annuties. 1c) Operating activities are the sale of products and/or services, and the costs incurred to operate a business. 2)Determine inancial statement counts allected, belance sheet or income statement Determine secours and amount of increases/decreased 31 Balance Sheet accounts: Assets = Liabilities + Stockholders Equity. Income Statement Accounta: RAVANURA - Expenses = Net Income Equations must stay in balance) 41 The adjustment to recognize depreciation is conceptually the same as the Adjustment for Prepaid Insurance. The Asset account la meduced and an expense is recognized. As the insurance expires, the original amount la reduced. With tangihi Asarts, as the coat is allocated over the expected to the whale of the Asset , remains intact. Contra- acounts are used to record al of the experise write-offs, depreciation experise in an account called accumulated depreciation that represents the running total of expense for the asset Contra-accounts function opposite the associated account 51 Calcune depreciable cost. Subtract salvage value from asset cost. 61 Divice depreciable cost by useful life (120 montis) for depreciation expense 71 This sa cctcrred expense, cash paid before expense is incurred. Unexpired costs are assets. As costs expire, they become expense. 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. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. Balance Sheet Income Statement Stockholders Net Assets Liabilities Equity Revenues Income Expenses Depreciation Expense-Furniture Accumulated Depreciation Furniture -125 No Entry 0 x No Entry 125 -125 Falah Check My Wors Partially correct C. Interest on the promissory note Operating Accounts Interest Payable Increase, Interest Expense Increase Statements Balance Sheat and Income Statement Food Check My Work 11 Determine activity 1a) Financing activities are transactions (other than payment of interest involving borrowing from creditors or repaying creditors. This also includes transactions with the company's owners Businesses borrow money or raise money from selling of their stock. 16) Investing activities are obtaining money by building up operations or purchasing imasiment products such a Rocks, bonds and arrifes 16) Operating actvities are the sale of products and or services, and the costs incurred to operate a business 2)Determine financial statement accounts attected, balance sheet or income statement. Determine accounts and amount of increasesdecreases 3) Balerce Sheelaunts Assels - Lisbiles Stockholders' Equity Income Statement accounts: Revenues - Expenses = Net Income. (Fquations must stay in balaca 4) This is an accrued liability, expense curred before cash is paid. Cash is paid after an expense is actually incurred. Record expense as incurred 5) Record monthly interests incurred with interest expense and interest payable. Calculate Interest = principlex mex time (1112). 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., a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Net Assets Liabilities Stockholders' Equity X Revenues Expenses Income No Entry o Interest Payable 300 No Entry 0 Interest Expense 300 -300 Food Check My Work Partially correct d. Recognition of the expired portion of the insurance Activity Operating Accounts Prepaid Insurance Decrease, Insurance Expense Increase Statements Balance Sheet and Income Statement Fuck Check Ne Word 1) Determine activity 1) Financing activities are transactions other than payment of interest involving borrowing tram creditors or repaying creditors. This also includes transactions with the company's owners. Businesses borrow money or raise money from selling of their stock. 16) Investing actividus are obtaining money by building up operations or purchasing investment products such as stocks bunds and annuities 1c Operating activities are the sale of products andlor services, and the costs incurred to operate a business. 2)Determine financial statement counts afected, han sheet or income statement, Determine accounts and amount of incredere 3) Balance Shoot accounts: Assets - Liabilities + Stockholders Equity Income Statement Accounts: Revenues - Expenses = Net Income (Equations must way in balance 4) Determine amount of insurance expired for one-month expense. Divide policy amount by 24 months for monthly expense. How does this entry affect the secounting equation? If a financial statement item is not affected, select "Ne Entry' and leave the amount box blank. If the effect on a financial statement itern is negative, i.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 Prepaid Insurance -250 No Entry X No Entry Insurance Expense 250 -250 Feedback CM, Work Partially correct c. Recognition of the earned portion of the guest's depasit. Activity Operating Accounts Rent Received in Advance Decrease, Revenue from Rental of Rooms Increase Statements Balance Sheet and Income Statement Feedback Chy Work 1) Determine activity 1a) Financing activities are transactions father than payment of interest inching borrowing from creditors or repaying creditors. This also includes transacions with the company's owners. Businesses borrow money or raise money from seling of the stock. 1h) Investing activities are cbtaining money by building up operations or purchasing investment products such as stocks, hands and Annuities. 1ci Operating activities are the sale of produck and services, and the wom incurred to operate a business. 2)Determine financial statement accounts affected, balance sheet or Income statement. Descrmine accounts and amount of increasesidecreases. 3) Balance Sheet accountsAseels Lisbiilies + Stockholders' Equity Income Statement accoun: Revenues Expenses - Net Income. (Equations must stay in balance 4) This is a deferred revenue.cash received before revenue is earned. Cash is received before revenue has been eamed, creating rent received in advance. Recurd revenue sumed. Divide by 2 for weekly amount. How does this entry affect the accounting equation? Ir a financial statement item is not affected, select "No Entry" and leave the amount bax blank. If the effect on a financial statement item is negative, le, a decresse, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Assets Liabilities Equity Revenues Expenses No Entry Rent Recelved in Advance -490 Revenue from Rental of Rooms 490 No Entry Net Income 490 Towder Check My Work Partially correct f. Wages earned during the second half of January amount to $5,120 and will be paid on February 3. Activity Operating Accounts Wages Payable Increase, Wages Expense Increase Statement(s) Balance Sheet and Income Statement Check My Work 1) Determine activity 1a) Financing activities are transacions other than beyment of interes involving borrowing from creditors or repaying creditors. This also induced transactions with the company's owners. Businesses borrow money or raise money from selling of therlock 1) Investing activities are obtaining money by building up operations or purchasing investment products such as stocks, bords and annatics. 1cOperating activities in the sale of pducts andar Service, and the costs incurred to operate a business 2)Determine financial statement accounts atiecod bakance sheet or income statement Determine accounts and amount of increased decreases 3) Balance Sheet accounts: Assets = Uables + Stockholders'Equity Income Steement accounts. Reveres - Expert - Net Income (Equations must stay in balance) 4) The IR an Acredibility, expens incurred before cash la paid Carhla paid Aher An expensis actually incurred. Record wage and salary REPANGA RR incured. How does this entry affect the accounting equation? If a financial statement item is not affected, select 'No Entry' and leave the amount bax 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 Net Stockholders Equity Assets + Revenues Expenses Income Liabilities Wages Payable No Entry o 5,120 No Entry Wages Expense 5,120 -5,120 Chuck My Work Partially correct 9. Cleaning supplies un hand on January 31 amount to $230. Activity Operating Accounts Cleaning Supplies Decrease, Cleaning Supplies Expense Increase Statements) Balance Sheet and Income Statement Gluck My 1) Determine Activity 18) Financing activities se transactions (other than payment of interess) involving borrowing from creditors or receying creditors. This also includes transactions with the company's owners Businesses borrow money or raise money from seling of their stock 16) Invesing actics are chlaining money by building up operations or purchasing Investment products such as stocks, bonds and annultics. 1) Operating activities are the sale of product and services, and the cats incumed to get a business 2) Determine financial statement accounts afeciec, balance sheet or income statement. Determine accounts and amount uf increases cecreases 2) Balance Shoot Accounts: Assets = Liabilities + Stockholders' Equity Income Statement accounts: Revenuss - Expenses - Net Income. (Equations must stay in balance 4) Suteract the ending balance for cleaning upplies from the beginning balance for the amount ured (expense) Excerea decrease Stockholders' Feuity Unspired Data Ane B. As corta cepire they become expense How does this entry affect the accounting equation? If a finandal 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 Net Stockholders Equity Assets Liabilities + Revenues Income Expenses Cleaning Supplies Expense Cleaning Supplies -720 No Entry o X No Entry O o 720 -720 Pack GoWork Partially correct h. A gas and electric bill that is received from the city announts to $740 and is payable by February 5. Activity Operating Accounts Utilities Payable Increase, Utilities Expense Increase Statement(s) Balance Sheet and Income Statement Fudback Check My Work 1) Determine activity 1A) Financing Activities ar taina (other than payment of interest involving borrowing from creditors or repaying creditora. This also includes transaction with the company's owners. Business horrow maneyar alae money from galing of their stock 1b) Investing activities are obtaining money by buiding up operations ur purchasing imustment products such as stocks, bonds and annuites. 10 Operating activities are the sale of products and or services, and the costs incurred to operate a business 2)Determine financial statement escounts lected, belance sheet or income statement. Determine counts and amount of increases coses 3) Balance Shoot accounts: Assels = Liabilities + Stockholders' Equity. INOMA SALAMAT Accounta: RAVINURR - Expe=Not Income 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, ie, a decrease, be sure to enter the answer with a minus sign Balance Sheet Income Statement Stockholders' Assets Liabilities Equity Revenues Expenses No Entry 0 Utilities Payable 740 x No Entry Utilities Expense 740 Net Income -740 Futbah Chook Me Ward Partially correct Activity i. Income taxes are to be accrued at a rate of 30% of income before taxes. Operating Accounts Income Tax Payable Increase, Income Tax Expense Increase Statements) Balance Sheet and Income Statement Feedback Check My Won 1) Delarmine activity. 1a Financing activities are transactions (other than payment of Interest Inwching borrowing from creditors or repaying creditors. This also includes transactions with the company's owners. Businesses borrow money or raise money from selling of their stock. 1b) Invesing activities are obtaining money by building up operation or purchasing investment products such as slocka, bonds and annuities 10) Operating activities are the saic of products andior services, and the costs incurred to operate a business. 2)Determine linenc al statement accounts affected, balance sheet or income serientDetermine secounts and amount of increases/decreases 2) Balance Sheet accounts: Assets = Uables + Stockholders' Equity Income Statement accounts Revenue - Express - Net Income Equasons must stay in balance 4 Total al revenue and expense account Subirac Al Asponse from all revenues for income before taxea. Multiply tax rate by income before tres for income tax expense 5) This is an accrued liability, expense incurred before cash is paid Cash is paid ater an expenso is actually incurred. Record income tax expenso as incurred. 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 Net Stockholders' Equity Assets Liabilities Revenues Expenses Income No Entry D Income Tax Payable 1,007 X No Entry D Income Tax Expense 1,007 -1,007 Pack Check My Word Portaly correct