Pattern your response to this after the examples we did in class. The easiest way to complete this assignment is to use an Excel spreadsheet. You may also complete this assignment using WORD; however, WORD will not enable you to automatically total columns. I have posted a template with t-accounts if you would like to use that as a starting point. Sundown should not be completed on a group basis and should be submitted by bringing a hard copy to class on the due date. No late assignments will be accepted so plan accordingly.
Sundown Bay Inn is incorporated on January 2, 2011. The following transactions are entered into during the month of January. January 2: The owners contribute $850,000 in cash in exchange for shares of stock in the business. January 3: A ten-year, 6%, $500,000 promissory note was signed at the Second State Bank.
Interest and principal will be repaid on the maturity date of January 3, 2021. January 4: A Victorian inn is purchased for $1,100,000 in cash. An appraisal performed on this date indicates that the land is worth $300,000 and the remaining balance of the purchase price is attributable to the house. Establish two columns, one for Land and one for Building. January 4: Cleaning supplies are purchased on account for $1,200. The bill is payable within 30 days January 5: New furniture for the inn is purchased at a cost of $150,000 in cash. January 6: A 3-month- property insurance policy is purchased for $3,600 in cash. January 15: Wages of $2,500 for the first half of the month are paid in cash. January 16: A guest mails Sundown $3,500 in cash in full payment for a room to be rented for two weeks. The guest plans to stay at the inn during the last week of January and the first week of February. January 17: An advertisement for the inn is placed in the local newspaper. Sundown Bay pays $600 cash for the ad, which will run in the paper throughout the remainder of January. January 30: A dividend of $2,000 was paid to the shareholders. January 31: Cash receipts from rentals of rooms (in addition to the $3,500 above) for the month amount to $53,000.
The following adjustments will be needed on January 31, 2011: a. Interest on the promissory note. Remember, interest rates are stated on an annual basis and you should calculate interest for one month. b. Recognition of the expired portion of the insurance. c. Recognition of the earned portion of the guest\'s deposit. d. Wages earned during the second half of January amount to $3,200 and will be paid on February. 3. e. Cleaning supplies on hand on January 31 amount to $650. f. Depreciation for the month is recorded for the building portion of the property. The house has a 20 year useful life and uses the straight-line method of depreciation. Land does not depreciate g. Depreciation for the month is recorded for the furniture. It has a 10 year useful life and uses the straight-line method of depreciation. h. A gas and electric bill for January amounts to $3,250 and is payable by February 5. Required: 1. Prepare journal entries for these transactions. 2. Establish t-accounts for each account, and post the journal entries to these t-accounts. You may use the excel template provided for the t-accounts. 3. Prepare a January income statement, statement of shareholder’s equity, a January 31, 2011 balance sheet and a statement of cash flows for January.
These statements should all be in good form. Follow the examples of statements in Chapter 2 to get the correct titles, headings, totals, etc. NOTE: All calculations can be rounded to the nearest dollar. For all adjustments base your calculations on a monthly rather than a daily allocation.
