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nasty-shy [4]
3 years ago
7

Pikes Peak is a ski resort in upstate New York. The company sells lift tickets, ski lessons, and ski equipment. It operates seve

ral restaurants and rents townhouses to vacationing skiers. The following hypothetical December transactions are typical of those that occur at the resort.
Borrowed $745,000 from the bank on December 1, signing a note payable, due in six months.
1. Purchased a new snowplow for $27,500 cash on December 31.
2. Purchased ski supplies for $14,300 on account.
3. Incurred $31,800 in routine maintenance expenses for the chairlifts; paid cash.
4. Received $74,500 for season passes (beginning in the new year).
5. Daily lift passes were sold this month for a total of $84,200 cash.
6. Received a $520 deposit on a townhouse to be rented for five days in January.
7. Paid half the charges incurred on account in (c).
8. Incurred and paid $22,300 in wages to employees for the month of December.
Required:
1. Prepare accrual basis journal entries for each transaction.
2. Calculate the company’s preliminary net income.
Business
1 answer:
finlep [7]3 years ago
6 0

Answer:

1. a. Dr Cash $745,000

Cr Note payable $745,000

b. Dr Equipment $27,500

Cr Cash $27,500

c Dr Supplies $14,300

Cr Accounts payable $14,300

d. Dr Repairs and maintenance expense $31,800

Cr Cash $31,800

e. Dr Cash $74,500

Cr Unearned revenue $74,500

f. Dr Cash $84,200

Cr Service revenue $84,200

g. Dr Cash $520

Cr Unearned revenue $520

h. Dr Accounts payable (14300*1/2] $7,150

Cr Cash $7,150

i. Dr Salaries and wage expense $22,300

Cr Cash $22,300

2. Net income $30,100

Explanation:

1. Preparation of the accrual basis journal entries for each transaction

a. Dr Cash $745,000

Cr Note payable $745,000

b. Dr Equipment $27,500

Cr Cash $27,500

c Dr Supplies $14,300

Cr Accounts payable $14,300

d. Dr Repairs and maintenance expense $31,800

Cr Cash $31,800

e. Dr Cash $74,500

Cr Unearned revenue $74,500

f. Dr Cash $84,200

Cr Service revenue $84,200

g. Dr Cash $520

Cr Unearned revenue $520

h. Dr Accounts payable (14300*1/2] $7,150

Cr Cash $7,150

i. Dr Salaries and wage expense $22,300

Cr Cash $22,300

2. Calculation to determine the company’s preliminary net income.

Service revenue $84,200

Less Expense :

Repairs and maintenance expense

($31,800)

Salaries and wage expense ($22,300)

Total expense (54100)

Net income $30,100

Therefore the company’s preliminary net income is $30,100

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