Question 1:
No. Date Account Debit ($) Credit ($) Explanation
1 Feb 28 Depreciation Expense 1,500 Accumulated Depreciation 1,500
2 Feb 28 Accounts Receivable 1,700 Service Revenue 1,700
3 Feb 28 Interest Expense 500 Interest Payable 500
4 Feb 28 Unearned Revenue 800 Service Revenue 800
5 Feb 28 Insurance Expense 300 Prepaid Insurance 300
Step 2: Single-Step Income Statement for February
Amazing Hotel
Income Statement
For the Month Ended February 28
Description Amount ($)
Revenues
Service Revenue (original + accrued + recognized) 12,600
Total Revenues 12,600
Expenses
Operating Expenses (original) 9,700
Depreciation Expense 1,500
Interest Expense 500
Insurance Expense 300
Total Expenses 12,000
Net Income 600
Question 2:
Sergio Company
Classified Balance Sheet
As of December 31, 20Y6
Assets
Current Assets:
Cash ................................................... $2,800
Accounts Receivable ............................. $1,900
Short-term Investments ......................... $2,500
Total Current Assets ............................................. $7,200
Non-current Assets:
Equipment ............................................. $8,700
Less: Accumulated Depreciation ........ ($5,000)
Net Equipment .................................................. $3,700
Intangible Assets ............................................ $2,500
Long-term Investments ................................... $5,700
Total Non-current Assets ..................................... $11,900
Total Assets ...................................................................... $19,100
Liabilities and Owner’s Equity
Current Liabilities:
Accounts Payable ..................................... $3,900
Non-current Liabilities:
Notes Payable (due in 5 years) ................ $6,900
Total Liabilities ....................................................... $10,800
Owner’s Equity:
Owner’s Capital .......................................... $8,300
Total Liabilities and Owner’s Equity .................... $19,100
Question 3:
Dr. Inventory .................................................. $1,400
Cr. Accounts Payable – Hunter ................... $1,400
Dr. Accounts Payable – Hunter ...................... $100
Cr. Inventory .................................................. $100
Dr. Accounts Receivable – Oliver Books .......... $1,400
Cr. Sales Revenue ......................................... $1,400
Dr. Cost of Goods Sold ...................................... $760
Cr. Inventory ................................................... $760
Dr. Accounts Payable – Hunter ..................... $1,300
Cr. Cash .......................................................... $1,274
Cr. Inventory (Discount) ............................... $26
Dr. Equipment .................................................... $5,000
Cr. Notes Payable ........................................... $5,000
Dr. Cash ............................................................ $500,000
Cr. Bonds Payable .......................................... $500,000
Dr. Cash ............................................................ $300,000
Cr. Common Stock ........................................ $100,000
Cr. Additional Paid-in Capital ....................... $200,000
Question 4:
Total Equipment Cost = $900,000 + $5,000 + $2,000 = $907,000
Depreciation Expense for 20X4 (Straight-line method)
Useful life: 10 years
Salvage value: $5,000
Depreciable base = $907,000 − $5,000 = $902,000
Annual depreciation = $902,000 ÷ 10 = $90,200 per year
Acquired on April 1, 20X4, so only 9 months depreciation for the year: 90200 *9 /12 = 67650
Dr. Cash ............................................................. $580,000
Dr. Accumulated Depreciation – Equipment ........... $383,350
Cr. Equipment ....................................................... $907,000
Cr. Gain on Sale of Equipment .......................... $56,350
