Question

E4-3 Recording Initial Transactions and Subsequent Adjustments During the month of September, the Texas Go-Kart Company had the following business activities a. On September 1, paid rent on the track facility for six months at a total cost of $12,000. b. On September 1, received $60,000 for season tickets for 12-month admission to the race track On September 1, booked the race track for a private organization that will use the track one day per month for $2,000 each time, to be paid in the following month. The organization uses the track on September 30. d. On September 1, hired a new manager at a monthly salary of $3,000, to be paid the first Mon- day following the end of the month. LO 4-1, 4-2 C. Required: First prepare the journal entry, if any, required to record each of the initial business activities on September 1. Then, prepare the adjusting journal entries, if any, required on September 30.

Answer 1

1.

Prepare journal entries as follows:

Credit S.no a Date Sep. 01 Debit $12.000 Accounts Title and Explanation Prepaid rent Cash (To record the prepaid rent) $12.000 6 Sep. 01 $60,000 Cash Unearned revenue (To record the unearned revenue) $60,000 Sep. 01 No entry d Sep 01 No entry

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Prepare Adjusting entries as follows:

Credit S.no a Date Sep. 30 Debit $2.000 Accounts Title and Explanation Rent expense ($12,000/6) Prepaid rent (To record rent expense) $2.000 | b Sep 30 $5,000 Unearned revenue($60,000/12) Ticket revenue (To record the ticket revenue) $5,000 Sep. 30 $2,000 Accounts receivable Rent revenue (To record the accounts receivable) $2.000 d Sep 30 $3.000 Salary expense Salaries payable (To record the salaries expense) $3.000