Problem 4-9 page 1

Problem 4-9 Monthly Transactions, Adjustments, and Financial Statements L05,6 Moonlight Bay Inn is incorporated on January 2, 2010, 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 esti mate that the house will have an estimated useful life of 25 years and. an estimated salvage value of $5,000. January 3: A twoyear, 12%, $30,000 promissory note was signed at Second State Bank. Interest and principal will be repaid on the maturity date of January 3, 2012. January 4: New furniture for the inn is purchased at a cost of $15,000 in cash. The furniture has an estimated useful life often years and no salvage value. January 5: A 24month 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 rst 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 rst 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