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.

1. Borrowed $745,000 from the bank on December 1, signing a note payable, due in six months.
2. Purchased a new snowplow for $27,500 cash on December 31.
3. Purchased ski supplies for $14,300 on account.
4. Incurred $31,800 in routine maintenance expenses for the chairlifts; paid cash.
5. Received $74,500 for season passes (beginning in the new year).
6. Daily lift passes were sold this month for a total of $84,200 cash.
7. Received a $520 deposit on a townhouse to be rented for five days in January.
8. Paid half the charges incurred on account in (c).
9. 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.

Answer 1

Date	Account title	Debit	credit
a	Cash	745000
	Note payable		745000
b	Equipment	27500
	cash		27500
c	Supplies	14300
	Accounts payable		14300
d	Repairs and maintenance expense	31800
	cash		31800
e	Cash	74500
	Unearned revenue		74500
f	cash	84200
	service revenue		84200
g	Cash	520
	Unearned revenue		520
h	Accounts payable (14300*1/2]	7150
	cash		7150
i	Salaries and wage expense	22300
	cash		22300

2)

Service revenue	84200
less:Expense
Repairs and maintenance expense	(31800)
Salaries and wage expense	(22300)
Total expense	(54100)
Net income	30100