Question

Greek Peak is a ski resort in upstate New York. The company sells lift tickets, ski lessons, and ski equipment. It operates several restaurants and roots Townhouse to vacationing skiers the following hypothetical December transactions are typical of those that occur at the resort.

a. Borrowed $640,000 from the hank on December 1, signing a note payable due in six months.
b. Purchased a new snowplow for $14,750 cash on December 31.
c. Purchased ski supplies for 517,800 on the account.
d. Incurred $26,900 in routine maintenance expenses for the chairlifts paid cash.
e. Received $74,000 for season passes (beginning in the new year).
f. Daily lift passes were sold this month for a total of $97,200 cash.
g. Received a $750 deposit on a Townhouse to be rented for five days in January.
h. Paid half the charges incurred on account in (c).
i. Paid $26,500 in wages to employees for the month of December.
1. Prepare accrual basis journal entries for each transaction.
2. Calculate the company's preliminary net income

Answer 1

Answer and Explanation:

1. The journal entries are shown below:

a. cash Dr $640,000

To Short term note payable $640,000

(Being signing of note payable is recorded)

b. Equipment Dr $14,750

To cash $14,750

(being equipment purchased on cash is recorded)

c. Supplies Dr $17,800

To account payable $17,800

(being inventory purchased on account)

d. Repairs and Maintenance expense Dr $26,900

To Cash $26,900

(being cash paid is recorded)

e. Cash Dr $74,000

To Unearned revenue $74,000

(being cash is recorded)

f. Cash Dr $97,200

To Service revenue $97,200

(Being service revenue is recorded)

g. Cash Dr $750

To Unearned revenue $750

(being cash is recorded)

h. Account payable Dr $8,900 (50% of $17,800)

To cash $8,900

(Being cash paid is recorded)

i. Salaries & wages expense Dr $26,500

To cash $26,500

(being cash paid is recorded)

2. The net income is

= Revenue - expenses

= $97,200 - $26,900 - $26,500

= $43,800