A charter fishing company has sold fishing trips in advance for $125 apiece, and they have sold 210 tickets. And all of these tickets were used in January, except 30 will be used in February. They also rent a boat from another company for $72,000. And that was for 24 months. 2 years. And they've only used the boat for 1 month.
Now the first requirement down below is to prepare journal entries to record the collection of the money from the tourists, and, too, the revenue generated during January. So let's look at that. They received $125 for each of the 210 tickets. So down here, I'm multiplying $125 times 210, which equals 26,250. And I debit it cash. Now you notice that I didn't credit revenue, because we received this money in advance, and we have not earned it.
So it goes into a liability account that we call unearned revenue. And I've labeled it unearned fish trips. However, in January, we did have fishing trips that we earned, 210 minus the 30 that will be in February. So 180 trips we did earn. So the second journal entry, I'm moving out of unearned fish trips the 180 times $125, which equals the 22,500. And I'm debiting unearned fish trips, moving that finally to revenue earned fish trips.
Next requirement, is they want us to calculate Hawaii Blue's total obligation to tourists at the end of January. What they're asking is how much have we not earned and that we owe to the customers that will take their trip in February but perhaps might not and ask for a refund.
So I did the 30 trips times $125, and that equals the 3,750. Now they're asking on the next question on what financial statement, which section, would this amount appear. Again this is 3,750 is unearned revenue. It's a liability. So we go into balance sheet, and on the current liabilities section of the balance sheet.
Next requirement, they want us to prepare journal entries to record the payments to the specific yacht company-- the company that they're renting the boat from-- and the adjustment January 1. So remember, we paid $72,000 in advance, so we call that prepaid boat rental. And we credit it cash.
Now at the end of January, we have used 1/24 of that $72,000, because it covered 24 months. So I will move out of that prepaid boat rental 3,000 by debiting boat rental expense and crediting prepaid boat rental. They ask you, then, on what financial statement would Hawaii Blue's January boat rental cost appear. Well, that boat rental expense will appear on your income statement as an expense.
That completes the problem. Thank you very much.
This is Ashford University, Accounting 205, and we will be reviewing chapter 3, exercise 8. This problem deals with closing entries at the end of the accounting cycle. We need to close out the revenue accounts and expense accounts and we zero those out and move those amounts to the retained earnings account or capital account, whatever you'd like to call it. This problem calls it capital. And once it moved in there, that determines net income journal entries.
One closes out the revenue. Two closes the expenses to the capital account, and three, we close out the withdrawal account.
Let's take a look at what they've given us from the book. We have a number of accounts-- cash, accounts payable, prepaid insurance, land, accounts payable. Now we only close revenue and expense accounts. So we only have to do with the one revenue account here, $38,000, and the four expense accounts we'll close out. And then the third journal entry will be the $2,500 to close out the drawing. Let's see how we do that.
So if you look down below to close out the revenue account, revenue account has a normal balance of credit, so I debit that account in order to make it zero, and I move that amount as a credit to the capital account.
Second journal entry to close out the four expense accounts, which are a debit balance. We credit those four accounts, so it makes those zero. We add up the amount, $21,000, and we debit capital account, which reduces the capital account. The third journal entry is we close out the drawing account, which is up here, $2,500. It's a debit account, so we're going to credit the drawing account, make it zero, and move that to the capital account of
$2,500.
Now what this ultimately does is increases the capital account by the revenue of $38,000, decreases it by the $21,000 of expenses. So you really had $17,000 net income. But we also reduced the capital account by $2,500 for the drawings. So that's closing entries.Ch 3 Ex 4
Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.
Calculate Hawaii-Blue's total obligation to tourists at the end of January
On what financial statement and in which section would this amount appear?
What section of the financial statement would this amount appear?
Prepare journal entries to record (1) the payment to Pacific Yacht Supply and (2) the subsequent adjustment on January 31.
On what financial statement would Hawaii-Blue's January boat rental cost appear?
Ch 3 Ex 8
Miguel Gomez, Drawing
Service Revenue
Rent Expense
Ch 3 Pb 3
"Account to
be changed"
Unrecorded interest
Total Tuition in advance
Depreciation
Rent
Salaries
Feb 1 20X2
Jan 1 20X3
Unrecorded interest owed to the center totaled $275 as of December 31.
Interest Expense
All clients pay tuition in advance, and their payments are credited to the Unearned Tuition Revenue account. The account was credited for $75,500 on August 31. With the exception of $15,500, which represented prepayments for 10 months' tuition from several well-to-do families, all amounts were for the current semester ending on December 31.
Unearned Tuition Revenue
Depreciation on the school's van was $3,000 for the year.
Depreciation Expense
On August 1, the center began to pay rent in 6-month installments of $21,000. Kathy wrote a check to the owner of the building and recorded the check in Prepaid Rent, a new account.
Rent Expense
Two salaried employees earn $400 each for a 5-day week. The employees are paid every Friday, and December 31 falls on a Thursday.
Salary Expense
Kathy's Day Care paid insurance premiums as follows, each time debiting Prepaid Insurance:
Date Paid
Feb. 1, 20X2
Jan. 1, 20X3
Aug. 1, 20X3
Insurance Expense
Ch 4 Ex 3
Prepaid Insurance
Balance per bank
Note collected by bank
Balance per bank
Deposits in transit
Outstanding checks
Adjusted Bank Balance
Balance per company records
Bank service charge for January
Interest on note collected by bank
Note collected by bank
NSF check returned by the bank with the bank statement
Adjusted Book Balance
Ch 4 Ex 6
(1) Uncollectible accounts are estimated to be 5% of Credit Sales.
Uncollectible Accounts Expense
(2) Uncollectible accounts are estimated to be 14% of Accounts Receivable. Uncollectible Accounts Expense
How would Maverick's Accounts Receivable appear on the December 31 balance sheet under assumption (1) of part (a)?
Accounts Receivable
Less: Allowance for Uncollectible Accounts
How would Maverick's Accounts Receivable appear on the December 31 balance sheet under assumption (2) of part (a)?
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Net Receivables
Ch 4 Pb 3
What is the company's Uncollectible Accounts expense for 20X2?
Compute the net realizable value of Accounts Receivable at the end of 20X2.
Accounts receivable
Less: Allowance for Uncollectible Accounts
Net Realizable Value
Compute the net realizable value at the end of 20X2 as a percentage of respective year-end receivables balances. Analyze your findings and comment on the president's decision to close the credit evaluation department.
Attachment:- Guidance report.xlsx