Question

Silver Star Mountain Resort is a ski resort northeast of Vernon in British Columbia. Besides maintaining well-groomed ski runs, the company sells lift tickets, ski lessons, and ski equipment. It operates several restaurants and rents townhouses to vacationing skiers. The following hypothetical December 2017 transactions are typical of those that occur at the resort. a. Borrowed $680.000 from the bank on December 1, signing a note payable due in six months. b. Purchased a new snowplow for $38,000 cash on December 31. c. Purchased ski supplies for $19.000 on account. d. Incurred $40,000 in routine maintenance expenses for the chairlifts; paid cash. e. Received $108.000 for season passes (beginning in the new year). f. Sold daily lift passes this month for a total of $112.000 cash. g. Received a $500 deposit on a townhouse to be rented for five days in January 2018 h. Paid half the charges incurred on account in (c). i. Paid $21.600 in wages to employees for the month of December Parade

urgently required

Answer 1

Solution:

Preliminary Net Income is $ 50,400.

Silver Star Mountain Resort
Preliminary Income statement
For period ended December, 2017
Revenue
Sales Revenue	$               112,000
Other Revenue	$                             -
Total Revenue (A)	$               112,000
Operating Expenses
Wages Expense	$                  21,600
Maintenance Expense	$                  40,000
Total Expenses (B)	$                  61,600
Net Income (A-B)	$                  50,400

Notes:

1) Note payable borrowing does not comes in income statement but if any interest paid will be reflected in income statement, here no interest rate is mentioned.

2) Purchase of assets and supplies does not effect net income.

3) Next month January passes and renting of town hall are made but such revenue is not a part of December month. So, No effect on net income. There are Unearned Revenue for the entity.

4) Payment made for supplies does not effect net income.

5) All those revenues and expenses which were related to this December month will be reflected in net income.