Reference no: EM132631382
Happy Camper Park, Inc. was organized on April 1, 2019, by Barbara Evans. Barbara is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Barbara prepared the following income statement for the quarter that ended March 31, 2020.
Happy Camper Park, Inc.
Income Statement
For the Quarter Ended March 31, 2020
Revenues
Rent revenue $90,000
Operating expenses
Advertising $ 5,200
Salaries and wages 29,800
Utilities 900
Depreciation 800
Maintenance and repairs 4,000
Total operating expenses 40,700
Net income $49,300
Barbara thought that something was wrong with the statement because net income had never exceeded $20,000 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 ledger contains the following additional selected balances at March 31, 2020.
Supplies $ 6,200
Prepaid Insurance 7,200
Notes Payable 12,000
You then make inquiries and discover the following.
1. Rent revenues include advanced rentals for summer occupancy $15,000.
2. There were $1,700 of supplies on hand at March 31.
3. Prepaid insurance resulted from the payment of a one-year policy on January 1, 2020.
4. The mail on April 1, 2020, brought the following bills: advertising for week of March 24, $110; repairs made March 10, $260; and utilities, $180.
5. Salaries and wages expense total $300 per day. At March 31, 2 days' salaries and wages have been incurred but not paid.
6. The note payable is a 3-month, 10% note dated January 1, 2020.
Problem a. income statement for the quarter ended March 31, 2020.
Problem b. Explain to Barbara the generally accepted accounting principles that she did not recognize in preparing her income statement and their effect on her results.