Reference no: EM131499231

Question: The following transactions occurred for a new motel prior to and during the first month of operations. Study the transactions shown below and record necessary journal entries skipping a line between each entry. Journal entries and modified T ledger accounts can be prepared easily on lined paper following the examples shown in the text.

a. The owner invested $250,000 cash deposited in the business bank account.

b. The owner paid $108,000 cash for land.

c. The owner borrowed $300,000 on a mortgage payable at 8% interest.

d. The owner paid $285,400 cash for a building.

e. Equipment was purchased for $48,000, paying $12,000 cash; and the balance owed on a note payable.

f. Furnishings were purchased for $120,000 cash.

g. Linen inventory was purchased for $7,894 cash.

h. Supplies were purchased for $3,200 on account.

i. Vending inventory was purchased for $540 cash.

j. Room sales revenue during the month was $58,740; 98% cash and 2% credit cards.

k. Vending sales revenue from vending machines was $880 cash.

l. Wages of $3,120 cash were paid. m. The owner paid $3,200 on accounts payable.

n. The owner paid $4,200 on an annual liability and casualty insurance policy.

o. The owner paid $1,600 on the mortgage payable and $1,728 for interest.
After journalizing and posting the operating transactions, journalize the following adjusting entries (Use separate entries for clarity.):

1. Estimated closing value of the linen inventory is $7,220.

2. Wages earned by employees but unpaid are $416.

3. One-twelfth of the prepaid insurance has been consumed.

4. Interest owing, but not yet paid on the equipment note payable account is 1% of the balance owing at month-end.

5. Equipment has a 10-year life and a $3,000 residual value; SL depreciation.

6. Furnishings have an 8-year life and a $7,000 residual value; SL depreciation.

7. Building has a 20-year life and a $42,000 residual value; SL depreciation.

8. Supplies used during the first month are $533.