Question

Hotel Inc. had the accompanying balance sheet accounts, December 31, 2018:

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Assets                                                                                                   Liab. & Stockholders’ Equity

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Cash $ 32,000 Accounts Payable          $94,000

Accounts Receivable 35,000 Paid-in Capital              60,000

Inventory (Merchandise) 120,000 Retained income           75,000

Supply Inventory                     6,000

Store equipment @cost         60,000

Less: Accumulated       

      Depreciation                         (24,000)                ________________________________  

Total                                                    $229,000                 Total                                   $229,000         

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Following is a summary of transactions that occurred during 2018:

1. Owners invested $100,000 cash for the retail expansion
2. Purchases of merchandise inventory on open account, $420,000.
3. Sales $800,000, 20% cash and 80% on credit.
4. Cost of merchandise sold to customers, $500,000.
5. On July 1, 2018, borrowed $120,000 from a local bank. The note is payable at the end of 2020. Interest is payable together with principal on December 31, 2020 at a rate of 8%, APR.
6. On April 1, prepaid the annual rent in cash for the retail space, $18,000.
7. Disbursed $160,000 for wages through December.
8. Collections on accounts receivable, $500,000.
9. Payments on accounts payable, $425,000.

The following entries were made on December 31, 2018:

10. Previous supply inventory applicable to 2019 amounted to $1,000.

1. Prepare journal entries
2. Post entries to the ledger (T-accounts), keying your postings by transaction number.
3. Prepare a trial balance, December 31, 2018 with ALL NECESSAY ADJUSTMENTS
4. Prepare B/S, I/S and Statement of R/E by applying income tax rate of 20%.

6.4.1

Answer 1

Hotel Inc. Journal Enteries Trans. Particulars Cash a/c Dr. To Common Stock (Common stock issued for cash) Debit in $ Credit in $ 100000 100000 420000 Inventory a/c Dr. To Accounts Payable (Inventory on account) 420000 160000 640000 Cash a/c Dr. Accounts Receivable a/c Dr. To Sales (Sales made) 800000 500000 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) 500000 Dr. 120000 Cash a/c To Note Payable (Note Payable issued) 120000 5 Dr. 18000 Prepaid Rent a/c To Cash (Annual rent paid) 18000 Dr. 160000 Wages Expense a/c To Cash (Wages paid) 160000 500000 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 500000 Dr 425000 Accounts Payable a/c To Cash (Creditors paid) 425000

Dr. 5000 Adjusting Enteries 31.12.2018 Supplies Expense a/c To Supplies (Supplies Expensed) 5000 4800 31.12.2018 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 120000 x 8% x 6/12 4800 13500 31.12.2018 Rent Expense a/c Dr. To Prepaid Rent (Rent expensed) 18000 x 9/12 13500 23340 31.12.2018 Income Tax Expense a/c Dr. To Income Tax Payable (Income Tax accrued) 23340

Dr. 5000 Adjusting Enteries 31.12.2018 Supplies Expense a/c To Supplies (Supplies Expensed) 5000 4800 31.12.2018 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 120000 x 8% x 6/12 4800 13500 31.12.2018 Rent Expense a/c Dr. To Prepaid Rent (Rent expensed) 18000 x 9/12 13500 23340 31.12.2018 Income Tax Expense a/c Dr. To Income Tax Payable (Income Tax accrued) 23340

Worksheet For the period ending 31.12.2018 Particulars Cash Accounts Receivable Inventory (Merchandise) Prepaid Rent Supply Inventory Store equipment @cost Less: Accumulated Depreciation Accounts Payable Interest Payable Income Tax Payable Note Payable Paid-in Capital Retained income Sales Cost of goods sold Wages Expense Supplies Expense Interest Expense Rent Expense Income Tax Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 309000 309000 175000 175000 40000 40000 18000 13500 4500 6000 5000 1000 60000 60000 24000 24000 89000 89000 4800 4800 23340 23340 120000 120000 160000 160000 75000 75000 800000 800000 500000 500000 160000 160000 5000 5000 4800 4800 13500 13500 23340 23340 1268000 1268000 46640466401296140 1296140 Statement of Income For the period ending 31.12.2018 Sales Cost of goods sold Gross Profit Wages Expense Supplies Expense Interest Expense Rent Expense 800000 -500000 300000 160000 5000 4800 13500 183300 116700 -23340 93360 Income Tax Expense Net Income Statement of Retained Earnings For the period ending 31.12.2018 Beginning Balance Net Income 75000 93360 168360

Balance sheet As at 31.12.2018 Assets Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Assets Current Liabilities Cash 309000 Accounts Payable 89000 Accounts Receivable 175000 Interest Payable 4800 Inventory (Merchandise) 40000 Income Tax Payable 23340 117140 Prepaid Rent 4500 Supply Inventory 1000 529500 Non Current Liabilities Note Payable 120000 Non Current Assets Store equipment @cost 60000 Shareholders Equity Less: Accumulated Deprec -24000 36000 Paid-in Capital 160000 Retained income 168360 328360 Total Assets 565500 Total Liabilities & Equity 565500