Acc421 Intermediate Accounting I: Week 2 LTA Problem 1 - The HKO Company

Acc421 Intermediate Accounting I
Week 2 Learning Team Assignment

Problem 1
The HKO Company owns and operates an amusement park. The following are selected accounts from the HKO Company's trial balance as of December 31:
Debit Credit
Equipment 213,700
Accumulated Depreciation - Equipment 66,800
Notes Payables 100,200
Admissions Revenue 422,900
Advertising Expense 15,200
Salaries Expense 64,100
Interest Expense 1,600

The following information is also available:
1. The equipment is depreciated using the straight-line method over its estimated life of 12 years. The equipment has an estimated salvage value of $44,500
2. The note payable carries a 13% interest rate. It was given to the First National Bank on October 17 and is due to be repaid in 210 days after that date. (Note: Assume a 365 day year in any computations.)
3. During the Christmas holiday season, HKO Company ran a promotion for park admission tickets valid during the next year. In total, they sold 2,330 tickets at a price of $7 each. The sales amount was credited to Admissions Revenue.
4. Included in the Advertising Expense account balance is a $1,220 prepayment of advertising that will be aired on local radio stations during the first quarter of the next year.
5. As of December 31, there was $5,230 in salaries that had been earned but not recorded.
6. HKO Company ends its accounting year on December 31.

1. Prepare the annual adjusting journal entries necessary as of December 31.
2. Compute the amount of the following account balances that should be shown on the income statement for the year:
a. Interest Expense
b. Admissions Revenue
c. Advertising Expense
d. Salaries Expense
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