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 t 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 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 use life of ten years and no salue 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. 3. Identify and analyze the necessary adjustments for each of the following: a. Depreciation of the house. Use straight line method of depreciation. 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. b. Depreciation of the furniture. Use straight line method oaccounting depreciation. 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, 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 correspondin financial statement item. c. Interest on the promissory note. 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. 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. d. Recognition of the expired portion of the insurance. 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. 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. e. Recognition of the earned portion of the guest's deposit. 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. 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 decrease, be sure to enter the answer with a minus sign. f. Wages earned during the second half of January amount to $5,120 and will be paid on February 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, decrease, be sure to enter the answer with a minus sign. 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, decrease, be sure to enter the answer with a minus sign. g. Cleaning supplies on hand on January 31 amount to $230. 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. 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. h. A gas and electric bill that is received from the city amounts to $740 and is payable by February 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. 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. i. Income taxes are to be accrued at a rate of 30% of income before taxes. 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. 4a. Prepare an income statement for the month ended January 31, 2017. 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 t 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 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 use life of ten years and no salue 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. 3. Identify and analyze the necessary adjustments for each of the following: a. Depreciation of the house. Use straight line method of depreciation. 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. b. Depreciation of the furniture. Use straight line method oaccounting depreciation. 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, 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 correspondin financial statement item. c. Interest on the promissory note. 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. 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. d. Recognition of the expired portion of the insurance. 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. 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. e. Recognition of the earned portion of the guest's deposit. 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. 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 decrease, be sure to enter the answer with a minus sign. f. Wages earned during the second half of January amount to $5,120 and will be paid on February 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, decrease, be sure to enter the answer with a minus sign. 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, decrease, be sure to enter the answer with a minus sign. g. Cleaning supplies on hand on January 31 amount to $230. 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. 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. h. A gas and electric bill that is received from the city amounts to $740 and is payable by February 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. 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. i. Income taxes are to be accrued at a rate of 30% of income before taxes. 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. 4a. Prepare an income statement for the month ended January 31, 2017