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.