Group 4

Cyrus Gatongay
Joe Lalimarmo

Case 4-4 Waltham Oil & Lube Center, Inc.

1. Prepare Journal Entries for the Period May 1 to July 31

DR CR

4/1/2019 $40,000 Capital contribution

Cash 40,000
Frank Knight Capital 40,000

$40,000 Deposit with National

Deposit - National Oil & Lube Center 40,000
Cash 40,000

4/30/2019 $6,000 furniture purchase

Furniture 6,000
Cash 6,000

$10,000 Capital contribution

Cash 10,000
Frank Knight Capita 10,000

$1,200 Insurance payment (12 months)

Prepaid Insurance 1,200
Cash 1,200

$35,450 deductions from deposit

Oil & Grease Inventory 6,320
Uniforms & Operating Supplies 4,130
Down payment for Equipment 25,000
Deposit - National Oil & Lube Center 35,450

$1500 Lease payment

Lease expense 1,500
Deposit - National Oil & Lube Center 1,500

$49,800 Note payable

Equipment 75,000
Down payment for Equipment 25,000
Deposit - National Oil & Lube Center 200
Note Payable 49,800

$108,600 Bank deposits

Cash 108,600
Parking revenue 3,300
 Services revenue 105,300

Oil & Grease Inventory 8,230

Salary Expense 34,560
Utilities expense 1,700
Miscellaneous expenses 6,600
Cash 51,090

$26,400 Lease payments ($1500 x 2 months = $3,000; $10 x 2,340 cars = $23,400)
Lease expense 3,000
Lease expense 23,400
Cash 26,400

$2,490 Equipment payables payments ($830 x 3 months)

Note Payable 2,490
Cash 2,490

Withdrawals by Frank Knight of $4,500

Withdrawals 4,500
Cash 4,500

Overnight parkers & Local Merchants

Accounts receivable 1,520
Parking Revenues 340
Service Revenues 730
Service Revenues (Knight Family use) 450

Employees payroll (owed)

Salary Expense 2,100
Salary Payable 2,100

Utilities owed
Utilities expense 350
Accrued Expense 350

Inventory costing $5,290 on hand ($6,320 + $8,230 - $5,290)

Cost of Sold 9,260
Oil & Grease Inventory 9,260

Furniture depreciation for period May to July ($6,000/120 mos*3 months)

Depreciation expense - Furniture 150
Accumulated depreciation - Furniture 150

Equipment depreciation for period May to July (($75,000/60 mos*3 months)

Depreciation expense - Equipment 3,750
 Accumulated depreciation - Equipment 3,750

Amortize Prepaid Insurance ($1,200/12*3)

Insurance expense 300
Prepaid Insurance 300
 2 What is the balance of the following accounts:

a. Capital
Knight has made two capital contributions ($40,000 and $10,000); so the total is
$50,000

b. Accumulated depreciation
The accumulated depreciation account is the sum of two amounts, $150 (furniture) and
$3,750 Equipment). The balance is $3,900.

c. Prepaid Assets
The only prepaid asset is prepaid insurance. The balance is $900 ($1200 - $300.)

d. Cash balance
The cash balance is $26,920

e. Accounts Receivable
Knight was owed $340 by overnight parkers and $730 by local merchants & $450
for his family's use of Waltham' service. The accounts receivable balance is $1,520.

f. Liabilities
There are three liabilities at the end of July. They are salary ($2,100), utilities ($350)
& notes payable ($47,310) The liability account balance is $49,760

3 What is the amount of the following:

a. Withdrawals is $4,500

b. Cost of Sales is $9,260

Beginning inventory $6,320
Purchase inventory $8,230
Ending Inventory $5,290

c. Parking revenues
The amount is $3,640 ($3,300 cash received and $340 account receivable)

d. Lease Expenses
The total amount is $27,900 (May $1500 prepaid flat rental, plus $3,000 June – July flat
rental paid and $23,400 - per car $10 payments.)

e. Total Revenues

Total revenues is the sum of parking revenues ($3,640), cash service revenues ($105,300)
and credit service sales ($730 + $450 of Waltham's family use.) The amount is $110,120.
4. How should Knight account for the $400 August parking checks? Possible bad
debts? Family use of Waltham Center's services?

a. Rent Revenue 400

Unearned Parking Revenue 400

b.

c. Accounts Receivable 450

Services Revenue 450