The following transactions occurred for a new motel prior to and during the first month of business operations. Study the motel transactions shown below and record the 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. Owner invested $360,000 cash deposited in the business bank account.
b. Owner paid $128,000 cash for land.
c. Owner borrowed $330,000 on a mortgage payable at 6% interest.
d. Owner paid cash for building $395,400.
e. Equipment was purchased for $62,000, paying $22,000 cash and the balance on a note payable.
f. Furnishings were purchased for $98,000 cash.
g. Linen inventory was purchased for $6,474 on account.
h. Supplies were purchased for $2,800 on account.
i. Vending inventory was purchased for $380 cash.
j. Room revenue during month was $44,000 cash.
k. Vending revenue from vending machines was $800 cash.
l. Wages of $2,900 cash were paid.
m. Owner paid $2,200 on accounts payable.
n. Owner paid $4,800 on annual liability and casualty insurance policy.
o. Owner paid $1,000 on the mortgage payable and $1,650 for interest.
After journalizing and posting the operating transactions, journalize the following adjusting entries: (Use separate entries for clarity.)
a. Estimated closing value of the linen inventory is $5,700.
b. Wages earned by employees but unpaid are $400.
c. One-twelfth of the prepaid insurance has been consumed.
d. Interest owing, but not yet paid, on the equipment notes payable account is 1 percent of the balance owing at month-end
e. Equipment depreciation is based on a life of 12 years with a $5,000 residual value, straight-line depreciation.
f. Furnishings depreciation is based on an eight-year life with a $4,000 residual (salvage) value, straight-line depreciation.
g. Building has a 20-year life with a residual (salvage) value of $45,000, straight-line depreciation.
h. Supplies used during the first month are $600.