Question

Sheffield Marina has 300 available slips that rent for $1,000 per season. Payments must be made in full by the start of the boating season, April 1, 2018. The boating season ends October 31, and the marina has a December 31 year-end. Slips for future seasons may be reserved if paid for by December 31, 2018. Under a new policy, if payment for 2019 season slips is made by December 31, 2018, a 4% discount is allowed. If payment for 2020 season slips is made by December 31, 2018, renters get a 18% discount (this promotion hopefully will provide cash flow for major dock repairs).On December 31, 2017, all 300 slips for the 2018 season were rented at full price. On December 31, 2018, 240 slips were reserved and paid for the 2019 boating season, and 56 slips were reserved and paid for the 2020 boating season.Prepare the appropriate journal entries for December 31, 2017, and December 31, 2018.

Answer 1

Please refer below the journal entries along with their explanation

Step-by-step explanation:

Journal Entries for December 31, 2017

2018 season

Cash (300 x $1000) Debit $300,000

Unearned Revenue Credit $300,000

(To record rent revenue for the year ended Dec 31, 2017).

Journal Entries for October 31, 2018

2018 season

Unearned Rent Debit $300,000

Rent Revenue Credit $300,000

Journal Entries for December 31, 2018

2019 season

Cash (240,000-9,600) Debit $230,400

Discount Debit $9,600

Unearned Revenue Credit $240,000

For 2019 season, renters shall avail the discount of 4% on 56 slips i.e. 240 x 1000 = 240,000

Discount = 240,000 x 0.04 = 9,600

2020 season

Cash (56,000-10,080) Debit $45,920

Discount Debit $10,080

Unearned Revenue Credit $56,000

For 2020 season, renters shall avail the discount of 18% on 56 slips i.e. 56 x 1000 = 56,000

Discount = 56,000 x 0.18 = 10,080