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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 $210,900
Operating expenses
Advertising expense $ 4,385
Salaries and wages expense 82,465
Utilities expense 930
Depreciation expense 3,150
Maintenance and repairs expense
4,065

Total operating expenses
94,995

Net income
$115,905


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 $ 8,685
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 $57,150.
2. There were $1,930 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, $135; repairs made June 18, $4,795; and utilities for the month of June, $240.
5. Wages expense is $300 per day. At June 30, four daysâ 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 $13,740 for the quarter is due in July but has not yet been recorded.



Prepare any adjusting journal entries required at June 30, 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
No.

Account Titles and Explanation

Debit

Credit

1.




2.




3.



4.


5.


6.


7.


Prepare a correct income statement for the quarter ended June 30, 2017.
ROADSIDE TRAVEL COURT
Income Statement
June 30, 2017For the Year Ended June 30, 2017For the Quarter Ended June 30, 2017

ExpensesRevenuesTotal ExpensesTotal RevenuesNet Income / (Loss)Retained Earnings, April 1Retained Earnings, June 30Dividends

$
ExpensesRevenuesTotal ExpensesTotal RevenuesNet Income / (Loss)Retained Earnings, April 1Retained Earnings, June 30Dividends
$

Expenses Revenues Total Expenses Total Revenues Net Income / (Loss) Retained Earnings, April 1 Retained Earnings, June 30 Dividends



ExpensesRevenuesTotal ExpensesTotal RevenuesNet Income / (Loss)Retained Earnings, April 1Retained Earnings, June 30Dividends

$

User Daniel Nadasi
by
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1 Answer

22 votes
22 votes

Answer:

Roadside Travel Court

1. Journal Entries:

1. Debit Rent Revenue $57,150

Credit Deferred Rent Revenue $57,150

To record deferred rent revenue.

2. Debit Supplies Expense $6,755

Credit Supplies $6,755

To record supplies expense.

3. Debit Insurance Expense $3,600

Credit Prepaid Insurance $3,600

To record insurance expense.

4. Debit Advertising expenses $135

Debit Repairs Expense $4,785

Debit Utilities Expense $240

Credit Advertising Payables $135

Credit Repairs Payable $4,785

Credit Utilities Payable $240

To record miscellaneous expenses.

5. Debit Wages Expense $1,200

Credit Wages Payable $1,200

To accrue unpaid wages.

6. Debit Interest Expense $560

Credit Interest Payable $560

To record interest expense.

7. Debit Income tax expense $13,740

Credit Income tax payable $13,740

To record accrued income tax expense.

2. Income Statement

For the Quarter Ended June 30, 2017

Revenues

Rent revenue $153,750

Operating expenses

Advertising expense $ 4,520

Salaries and wages expense 83,665

Utilities expense 1,170

Depreciation expense 3,150

Maintenance /repairs expense 8,860

Interest expense 560

Insurance expense 3,600

Supplies expense 6,755

Total operating expenses 112,280

Income before taxes $41,470

Income tax expense 13,740

Net income $27,730

Step-by-step explanation:

a) Data and Calculations:

Income Statement

For the Quarter Ended June 30, 2017

Revenues

Rent revenue $210,900 - 57,150 = 153,750

Operating expenses

Advertising expense $ 4,385 + 135 = 4,520

Salaries and wages expense 82,465 + $1,200 = 83,665

Utilities expense 930 + 240 = $1,170

Depreciation expense 3,150

Maintenance /repairs expense 4,065 + 4,795 = 8,860

Interest expense 560

Insurance expense 3,600

Supplies expense 6,755

Total operating expenses 94,995

Income tax expense 13,740

Net income $115,905

Balances on June 30:

Supplies $ 8,685

Prepaid Insurance 14,400

Notes Payable 14,000

Analysis of Adjustments:

1. Rent Revenue $57,150 Deferred Rent Revenue $57,150

2. Supplies Expense $6,755 Supplies $6,755 ($8,685 - $1,930)

3. Insurance Expense $3,600 Prepaid Insurance $3,600 ($14,400 * 3/12)

4. Advertising expenses $135 Advertising Payables $135

Repairs Expense $4,785 Repairs Payable $4,785

Utilities Expense $240 Utilities Payable $240

5. Wages Expense $1,200 Wages Payable $1,200 ($300 * 4)

6. Interest Expense $560 Interest Payable $560 ($14,000 * 6% * 2/3)

7. Income tax expense $13,740 Income tax payable $13,740

Rent Revenue $210,900

Less deferred 57,150

Rent Revenue $153,750

Supplies balance = $1,930

Prepaid Insurance balance =10,800 ($14,400 - 3,600)

User Himanshu Punetha
by
2.9k points