Answer:
Roadside Travel Court
1. Journal Entries:
1. Debit Rent Revenue $57,150
Credit Deferred Rent Revenue $57,150
To record deferred rent revenue.
2. Debit Supplies Expense $6,755
Credit Supplies $6,755
To record supplies expense.
3. Debit Insurance Expense $3,600
Credit Prepaid Insurance $3,600
To record insurance expense.
4. Debit Advertising expenses $135
Debit Repairs Expense $4,785
Debit Utilities Expense $240
Credit Advertising Payables $135
Credit Repairs Payable $4,785
Credit Utilities Payable $240
To record miscellaneous expenses.
5. Debit Wages Expense $1,200
Credit Wages Payable $1,200
To accrue unpaid wages.
6. Debit Interest Expense $560
Credit Interest Payable $560
To record interest expense.
7. Debit Income tax expense $13,740
Credit Income tax payable $13,740
To record accrued income tax expense.
2. Income Statement
For the Quarter Ended June 30, 2017
Revenues
Rent revenue $153,750
Operating expenses
Advertising expense $ 4,520
Salaries and wages expense 83,665
Utilities expense 1,170
Depreciation expense 3,150
Maintenance /repairs expense 8,860
Interest expense 560
Insurance expense 3,600
Supplies expense 6,755
Total operating expenses 112,280
Income before taxes $41,470
Income tax expense 13,740
Net income $27,730
Explanation:
a) Data and Calculations:
Income Statement
For the Quarter Ended June 30, 2017
Revenues
Rent revenue $210,900 - 57,150 = 153,750
Operating expenses
Advertising expense $ 4,385 + 135 = 4,520
Salaries and wages expense 82,465 + $1,200 = 83,665
Utilities expense 930 + 240 = $1,170
Depreciation expense 3,150
Maintenance /repairs expense 4,065 + 4,795 = 8,860
Interest expense 560
Insurance expense 3,600
Supplies expense 6,755
Total operating expenses 94,995
Income tax expense 13,740
Net income $115,905
Balances on June 30:
Supplies $ 8,685
Prepaid Insurance 14,400
Notes Payable 14,000
Analysis of Adjustments:
1. Rent Revenue $57,150 Deferred Rent Revenue $57,150
2. Supplies Expense $6,755 Supplies $6,755 ($8,685 - $1,930)
3. Insurance Expense $3,600 Prepaid Insurance $3,600 ($14,400 * 3/12)
4. Advertising expenses $135 Advertising Payables $135
Repairs Expense $4,785 Repairs Payable $4,785
Utilities Expense $240 Utilities Payable $240
5. Wages Expense $1,200 Wages Payable $1,200 ($300 * 4)
6. Interest Expense $560 Interest Payable $560 ($14,000 * 6% * 2/3)
7. Income tax expense $13,740 Income tax payable $13,740
Rent Revenue $210,900
Less deferred 57,150
Rent Revenue $153,750
Supplies balance = $1,930
Prepaid Insurance balance =10,800 ($14,400 - 3,600)
