George Jarvis purchased a trailer park on January 1, 0004. It is now March 31. George has no accounting training but has kept a record of his cash receipts and cash payments for the three months: As Mr. Jarvis's accountant, you discover the following additional information:
a. The building has an estimated life of 20 years and straight-line depreciation is used.
b. The office equipment has a five-year life with a trade-in value of $500.
c. The insurance was prepaid on January 1 for the entire year.
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Cash Receipts
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Cash Payments
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Jarvis investment for trailer
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$100,000
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park shares
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Land
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$168,600
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Building
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216,000
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Office equipment
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8,000
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Mortgage payable
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350,000
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Insurance
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4,800
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Wages
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4,500
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Maintenance
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400
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Office supplies
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300
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Utilities
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900
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Property taxes
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6,000
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Jarvis, salary
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10,500
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Rental sales revenue
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60,000
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Mortgage interest expense
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4,667
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Mortgage principal payments, Jan.
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2,000
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and Feb.
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d. The wages are for the maintenance worker who worked but has not yet been paid for five days during the period ending March 31. The wage is $9.00 per hour and the work day is eight hours.
e. An invoice for grounds maintenance expense of $80 has not yet been paid.
f. There are $100 in office supplies remaining in inventory.
g. The March utility bill has not yet been received. It is estimated to be $400.
h. The property taxes were paid in January for the entire year.
i. A rental tenant whose rent is $200 has not yet paid for March.
j. Included in the $60,000 received for rental income to date is the amount for a tenant who has prepaid for the entire year. The rent is $175 per month.
k. No interest or principal has been paid on the mortgage for March. Interest for March is $2,333. Principal payments for the balance of the year (including March) are $12,000.
l. The income tax is 25 percent of operating income and is payable in April. Using accrual based accounting, prepare an income statement for the three months ending March 31 and a balance sheet as of March 31.