Question

During the month of September, the Texas Go-Kart Company had the following business activities:1. On September 1, paid rent on the track facility for six months at a total cost of $11,400. 2. On September 1, received $38,400 for season tickets for 12-month admission to the race track. 3. On September 1, booked the race track for a private organization that will use the track one day per month for $1,900 each time, to be paid in the following month. The organization uses the track on September 30. 4. On September 1, hired a new manager at a monthly salary of $1,700, to be paid the first Monday following the end of the month.Required: 1. Prepare the journal entry, if any, required to record each of the initial business activities on September.Transaction General Journal Debit Credit 2. Prepare the adjusting journal entries, if any, required on September 30.Journal Entry Worksheet Record the adjusting entry for the payment of rent on the track facility for six months at a total cost of $13,800.

Answer 1

The initial journal entries involve prepayment of expenses and receipt of revenue, while the adjusting journal entry on September 30 records a month's worth of rent expense. The entries follow the accrual basis of accounting, ensuring expenses and revenues are recognized in the period they are incurred.

Step-by-step explanation:

The question relates to the recording of initial and adjusting journal entries for the Texas Go-Kart Company's business activities in September. The initial entries involve prepayment of rent, receipt of revenue from season tickets, booking a race track, and hiring a manager. The adjusting entries, on the other hand, typically recorded at the end of the accounting period, ensure that revenues and expenses are recognized in the period in which they are incurred, following the accrual basis of accounting. In the given case, an adjusting entry for prepayment of rent would be required on September 30 to recognize rent expense for one month and reduce the prepayment asset account.

Initial Journal Entries on September 1:

Prepaid Rent: Debit Prepaid Rent $11,400, Credit Cash $11,400.Unearned Revenue: Debit Cash $38,400, Credit Unearned Revenue $38,400.No journal entry for booking until payment is received.No journal entry for hiring manager until payment is made.

Adjusting Journal Entry on September 30:

Debit Rent Expense $1,900 (one month's rent out of six months prepaid), Credit Prepaid Rent $1,900.

Note: The cost provided in the question for the journal entry worksheet appears to be a typo, as it is stated differently in the initial activities. The cost should be $11,400 as mentioned at the beginning of the question.

Answer 2

rent expense 1,900 debit

prepaid rent 1,900 credit

unearned revenue 3,200 debit

ticket revenue 3,200 credit

rent expense 1,900 debit

rent payable 1,900 credit

salaries expense 1,700 debit

salaries payable 1,700 credit

Step-by-step explanation:

11,400 --> 6 month of rent

at end-of-the-month we recognize the expired amount:

11,400 / 6 = 1,900

38,400 represent 12 month of ticket this is unearned revenue which is recognize as time passes:

38,400 / 12 = 3,200

for the book it iwll be cosidered rent expense

and the salaries for the worker will be considered as payable as well because we didn't pay the employee yet.