Question

CALCULATO. STAMDAAD VIrw Pต|rTER VERSO- 'BACK ) Question 3 Roadside Travel Court was organizsed on July 1, 2016, by Betty Johnion, netty is a cod manager but a poor acountant. Prom the trial balance prepared by a part-time bootkeeper, 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 Rent revenue 211,600 Operating expenses Advertising expense Salaries and wages expense Ublities expense 3,940 82,725 950 2,825 4,445 Maintenance and repairs expen Total operating expenses Net income 94,885 116,715 tetty suspected thet something was wrong with the statement because net income had never eaceed $30,000 n any one quarter review the income statement and other data accountant, the auks you t Knowing that you are an experienced at Jue 30, 2017 You first loak at the triai balance. in addtion to the account balances reported Supplies Prepaid Insurance Notes Payable in then ncome eatement, the triw balance contains the follewing aditional selected balances 8,845 14,400 14,000 You then make inquiries and discover the following 1. ฝึ0edsde rentals revenesindude advanced rental payments roceived for turnmr 2. There were $1,840 of supplies on hand at June 30 . Prepaid insurance resulted from the peyment of a one-year polcy on 01 4. The mail in July 2017 brought the folowing bills: advertising for the w fne 24 $340 r 5. Wages expense is s305 per day At June 30, four days wages have heen ired but opa 6. The note payable is a 6% note dated May 1, 2017, and due on her 3.2017 7. Income tax of $14,095 for the quarter is due in July but has not yer been s tount of $57,870 mde une 18,4,0 d une 18,54,060 an ttes for the meth of ne,822

Answer 1

Solution

	Amount in USD otherwise stated
A. Journal entries
1	Revenues of 57870 to be reversed as it is receipt against advance rentals
	Particulars	Dr	Cr
	Advance rent	57870
	Rent Revenue		57870
2	Supplies in hand in 1840 instead of 8845
	Particulars	Dr	Cr
	Supplies expense	7005
	Supplies		7005
3	Prepaid insurance of 14400 paid for april to march, therefore insurance expense for quarter june to be booked
	Particulars	Dr	Cr
	Insurance expnese	3600
	Prepaid insurance		3600
4	Particulars	Dr	Cr
	Advertisement	140
	Repairs	4860
	Utilities	225
	Accounts payable		5225
5	Wages of 4 days to be accounted
	Particulars	rate/day	No of days in june unpaid	total
	Wages	305	4	1220
	Particulars	Dr	Cr
	Wages	1220
	Wages payable		1220
6	Notes payable @ 6% from may to june
	Particulars	Dr	Cr
	Interest expense	140
	Interest on notes payable		140
7	Particulars	Dr	Cr
	Tax	14095
	Tax payable		14095
B. Income statement
	Particulars	Pre adjustments	Adjustments	Post adjustments
	Revenues
	Rent revene	211600	-57870	153730
	Operating expense
	Advertising expense	3940	140	4080
	Salaries and wages expense	82725	1220	83945
	Utilities expense	950	225	1175
	Depreciation expense	2825		2825
	Insurance	0	3600	3600
	Supplies expense	0	7005	7005
	Maintenance and repairs	4445	4860	9305
	EBIT	116715	-74920	41795
	Interest cost	0	140	140
	EBT	116715	-75060	41655
	Tax	0	14095	14095
	Profit after tax	116715	-89155	27560