Question

Vail Resorts, Inc., owns and operates 11 premier year-round ski resort properties (located in the Colorado Rocky Mountains, the Lake Tahoe area, the upper midwest, Vermont, and Australia). The company also owns a collection of luxury hotels, resorts, and lodging properties. The company sells lift tickets, ski lessons, and ski equipment. The following hypothetical December transactions are typical of those that occur at the resorts.
Borrowed $2,300,000 from the bank on December 1, signing a note payable due in six months.
Purchased a new snowplow for $98,000 cash on December 31.
Purchased ski equipment inventory for $35,000 on account to sell in the ski shops.
Incurred $62,000 in routine repairs expense for the chairlifts; paid cash.
Sold $390,000 of January through March season passes and received cash.
Sold a pair of skis from inventory in a ski shop to a customer for $700 on account. (The cost of the skis was $400). (Hint: Record two entries.)
Sold daily lift passes in December for a total of $320,000 in cash.
Received a $3,500 deposit on a townhouse to be rented for five days in January.
Paid half the charges incurred on account in (c).
Received $400 on account from the customer in (f).
Paid $245,000 in wages to employees for the month of December.
Required:

1. Prepare journal entries for each transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Assume that Vail Resorts had a $1,000 balance in Accounts Receivable at the beginning of December. Determine the ending balance in the Accounts Receivable account at the end of December based on transactions (a) through (k).

Answer 1

Answer:

A.

a. Dr Cash $2,300,000

Cr Notes payable $2,300,000

b. Dr Equipment $98,000

Cr Cash $98,000

c.Dr Inventory $35,000

Cr Accounts payable $35,000

D. Dr Repair expense $62,000

Cr Cash $62,000

e. Dr Cash $390,000

Cr Unearned revenue $390,000

f. Dr Accounts receivable $700

Cr Sales revenue $700

Dr Cost of of goods sold $400

Cr Inventory $400

g. Dr Cash $320,000

Cr Sales revenue $320,000

h. Dr Cash $3,500

Cr Unearned revenue-deposit $3,500

i. Dr Accounts payable $17,500

Cr Cash $17,500

j. Dr Cash $400

Cr Accounts receivable $400

k. Dr Wages expense $245,000

Cr Cash $245,000

B. $1,300

Explanation:

A. Preparation of Journal entries

a. Dr Cash $2,300,000

Cr Notes payable $2,300,000

[To record cash borrowed from bank]

b. Dr Equipment $98,000

Cr Cash $98,000

[To record purchase of snowplow]

c.Dr Inventory $35,000

Cr Accounts payable $35, 000

[To record purchase of inventory on account]

D. Dr Repair expense $62,000

Cr Cash $62,000

[To record payment of repair expense]

e. Dr Cash $390,000

Cr Unearned revenue $390,000

[To record sale of season passes]

f. Dr Accounts receivable $700

Cr Sales revenue $700

[To record credit sales]

Dr Cost of of goods sold $400

Cr Inventory $400

[To record cost of goods sold]

g. Dr Cash $320,000

Cr Sales revenue $320,000

[To record sales ]

h. Dr Cash $3,500

Cr Unearned revenue-deposit $3,500

[To record customer deposits]

i. Dr Accounts payable $17,500

[35,000 x 1/2]

Cr Cash $17,500

[To record cash paid for accounts payable]

j. Dr Cash $400

Cr Accounts receivable $400

[To record collections from customers]

k. Dr Wages expense $245,000

Cr Cash $245,000

[To record payment of wages]

B. Calculation to Determine the ending balance in the Accounts Receivable account at the end of December

Beginning Accounts Receivable 1,000

Add: Sales on account 700

Less: Cash received on account -400

Ending balance in Accounts Receivable $1,300

Therefore the ending balance in the Accounts Receivable account at the end of December will be $1,300