Question

Roadside Travel Court was organized on July 1, 2016, by Betty Johnson. Betty is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Betty prepared the following income statement for her fourth quarter, which ended June 30, 2017.

ROADSIDE TRAVEL COURT Income Statement For the Quarter Ended June 30, 2017
Revenues
Rent revenue				$216,900
Operating expenses
Advertising expense		$ 4,740
Salaries and wages expense		81,985
Utilities expense		935
Depreciation expense		2,935
Maintenance and repairs expense		4,350
Total operating expenses				94,945
Net income				$121,955

Betty suspected that something was wrong with the statement because net income had never exceeded $30,000 in any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other data.

You first look at the trial balance. In addition to the account balances reported above in the income statement, the trial balance contains the following additional selected balances at June 30, 2017.

Supplies		$ 8,270
Prepaid Insurance		14,400
Notes Payable		14,000

You then make inquiries and discover the following.

1.		Roadside rentals revenues include advanced rental payments received for summer occupancy, in the amount of $57,685.
2.		There were $1,955 of supplies on hand at June 30.
3.		Prepaid insurance resulted from the payment of a one-year policy on April 1, 2017.
4.		The mail in July 2017 brought the following bills: advertising for the week of June 24, $120; repairs made June 18, $4,605; and utilities for the month of June, $255.
5.		Wages expense is $305 per day. At June 30, four days’ wages have been incurred but not paid.
6.		The note payable is a 6% note dated May 1, 2017, and due on July 31, 2017.
7.		Income tax of $13,780 for the quarter is due in July but has not yet been recorded.

Answer 1

Roadside Travel Court Journal Enteries Trans. Particulars 1 Rent Revenue Unearned Rent Revenue Debit in $ Credit in $ 57685 57685 159215 2 6315 Supplies Expense Supplies 8270-1955 = 6315 6315 Income Statement For the Quarter ending 30.6.2017 Rent Revenue Less: Supplies Expense Insurance Expense Advertising Expense Utilities Expense Salaries and Wages Expense Interest Expense Income Tax Expense Maintenance and Repairs Expense Depreciation Expense Net Income (loss) 6315 3600 4860 1190 83205 3 3600 Insurance Expense Prepaid Insurance 14400 x 3/12 140 13780 3600 8955 2935 124980 34235 4 120 4605 Advertising Expense Maintennace abd Repairs Expense Utilities Expense Accounts Payable 255 216900 - 57685 = 159215 4980 5 1220 Salaries and Wages Expense Salaries and Wages Payable 305 x 4 1220 6 140 Interest Expense Interest Payable 14000 x 0.06 x 2/12 = 140 140 7 13780 Income Tax Expense Income Tax Payable 13780