Question

Pikes Peak is a ski resort in upstate New York. The company sells lift tickets, ski lessons, and ski equipment. It operates several restaurants and rents townhouses to vacationing skiers. The following hypothetical December transactions are typical of those that occur at the resort. Borrowed $625,000 from the bank on December 1, signing a note payable, due in six months. Purchased a new snowplow for $26,000 cash on December 31. Purchased ski supplies for $10,700 on account. Incurred $25,100 in routine maintenance expenses for the chairlifts; paid cash. Received $77,750 for season passes (beginning in the new year). Daily lift passes were sold this month for a total of $89,000 cash. Received a $600 deposit on a townhouse to be rented for five days in January. Paid half the charges incurred on account in (c). Incurred and paid $18,300 in wages to employees for the month of December.
Prepare accrual basis journal entries for each transaction.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a. Cash Dr $625,000

             To Short term note payable $625,000

(Being the borrowed amount is recorded)

b. Equipment Dr $26,000

           To cash $26,000

(Being the equipment is purchased for cash)

c. Supplies Dr $10,700

         To Account payable $10,700

(Being the purchased of supplies on account is recorded)

d. Repairs and maintenance expense $25,100

              To Cash $25,100

(Being cash paid is recorded)

e. Cash Dr $77,750

         To Unearned revenue $77,750

(Being the cash received is recorded)

f. Cash Dr $89,000

          To Service revenue $89,000

(Being the cash received is recorded)

g. Cash Dr $600

         To Unearned revenue $600

(Being the cash received is recorded)

h. Account payable Dr $5,350

          To cash $5,350

(Being cash paid is recorded)

i.  Salaries and wages expense $18,300

              To Cash $18,300

(Being cash paid is recorded)