Receipts: Hart\'s investment of personal funds $1,400 Court rental fees 7,375 Te
ID: 2371501 • Letter: R
Question
Receipts:
Hart's investment of personal funds $1,400
Court rental fees 7,375
Tennis lesson fess 1,975
Tennis lesson fees received in advance 150
Proceeds of short-term loan from bank 900
Total receipts $11,800
Disbursements:
Purchase of ball-throwing machine 140
Supplies Purchased 960
Utilities 175
Lease payments to city 990
Wages to part-time assistant 1,500
Liability insurance premiums 210
Repayments of bank loan, including interest 920
Withdrawals of cash for personal expenses 750
Total disbursements $5645
Cash balance, August 31, 1993 $6155
b. Repayments to the bank included $ 250 of interest expense on the loan.
c. Rental receipts include all revenue earned except for $500 due from a company that rented the entire set of courts for a weekend late in
August.
d. A ball-throwing machine, purchased used, turned out to be quite temperamental. With a complete breakdown shortly after it was purchased, it was junked. (Note: Debit Equipment Loss)
e. Supplies consisted of cans of tennis balls. Lori gave away a free can of tennis balls for each five hours of court time rented by an individual. Supplies amounting to $ 120 were on hand at August 31; these may be returned for a full refund. Lori estimates that each month during the summer, she took home $15 worth of supplies for personal use.
f. All lease payments due the city were paid except for the final amount of $180.
g. Lori estimates that the utility bill for August, when received, will be $100.
Prepare Adjusting entries from a to g.
Explanation / Answer
a) Revenue - tennis lessons 150
Cash, etc. 150
Credit the account that was debited for the receipt of the lesson revenue.
b) Interest Expense 250
Note Payable 250
This assumes that the original journal entry debited the whole disbursement to notes payable.
c) Accounts Receivable 500
Revenue - court rental 500
d) Equipment loss 140
Equipment 140
e) Sales Promotion 840 Accounts Receivable 45
Supplies 840 Supplies 45
The second adjustment assumes that the company will hold Lori accountable for the supplies she took for personal use. The Sales Promotion debit is computed by subtracting the on hand inventory (120) from the supply disbursement (960). Then take out the amount Lori took (15 x 3). This also assumes a 3 month summer.
f) Lease Expense 180
Accounts Payable 180
g) Utilities Expense 100
Accounts Payable 100
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