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. a. Borrowed $740,000 from the bank on December 1, signing a note payable, due in six months. b. Purchased a new snowplow for $26,250 cash on December 31. c. Purchased ski supplies for $14,900 on account. d. Incurred $26,400 in routine maintenance expenses for the chairlifts; paid cash. e. Received $81,250 for season passes (beginning in the new year). f. Daily lift passes were sold this month for a total of $91,000 cash. g. Received a $485 deposit on a townhouse to be rented for five days in January h. Paid half the charges incurred on account in (c) i. Incurred and paid $22,200 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the company's preliminary net income. Preliminary Not Income

Answer 1

Answer:

1.

Transaction	General Journal	Debit ($)	Credit ($)
a.	Cash	740,000
	Notes Payable (Short - Term)		740,000
b.	Equipment	26,250
	Cash		26,250
c.	Supplies	14,900
	Accounts Payable		14,900
d.	Repairs and Maintenance Expense	26,400
	Cash		26,400
e.	Cash	81,250
	Unearned Revenue		81,250
f.	Cash	91,000
	Service Revenue		91,000
g.	Cash	485
	Unearned Revenue		485
h.	Accounts Payable	7,450
	Cash		7,450
i.	Salaries and Wages Expense	22,200
	Cash		22,200

2.

Expenses = Routine maintenance expenses + Wages to employees

= $26,400 + $22,200 = $48,600

Revenue = Daily Lift Passes = $91,000

Net Income = $91,000 - $48,600 = $42,400