Reference no: EM132551583

Florida Palms Country Club adjusts its accounts monthly. Club members pay their annual dues in advance by January 4. The entire amount is initially credited to Unearned Membership Dues. At the end of each month, an appropriate portion of this amount is credited to Membership Dues Earned. Guests of the club normally pay green fees before being allowed on the course. The amounts collected are credited to Green Fee Revenue at the time of receipt. Certain guests, however, are billed for green fees at the end of the month. The following information is available as a source for preparing adjusting entries at December 31:

1. Salaries earned by golf course employees that have not yet been recorded or paid amount to $9,600.

2. The Tampa University golf team used Florida Palms for a tournament played on December 30 of the current year. At December 31, the $1,800 owed by the team for green fees had not yet been recorded or billed.

3. Membership dues earned in December, for collections received in January, amount to $106,000.

4. Depreciation of the country club's golf carts is based on an estimated life of 15 years. The carts had originally been purchased for $180,000. The straight-line method is used. (Note: The clubhouse building was constructed in 1925 and is fully depreciated.)

5. A 12-month bank loan in the amount of $45,000 had been obtained by the country club on November 1. Interest is computed at an annual rate of 8 percent. The entire $45,000, plus all of the interest accrued over the 12-month life of the loan, is due in full on October 31 of the upcoming year. The necessary adjusting entry was made on November 30 to record the first month of accrued interest expense. However, no adjustment has been made to record interest expense accrued in December.

6. A one-year property insurance policy had been purchased on March 1. The entire premium of $7,800 was initially recorded as Unexpired Insurance.

7. In December, Florida Palms Country Club entered into an agreement to host the annual tournament of the Florida Seniors Golf Association. The country club expects to generate green fees of $4,500 from this event.

8. Unrecorded Income Taxes Expense accrued in December amounts to $19,000. This amount will not be paid until January 15.

Instructions

Question a. For each of the above numbered paragraphs, prepare the necessary adjusting entry (including an explanation). If no adjusting entry is required, explain why.

Question b. Four types of adjusting entries are described at the beginning of the chapter. Using these descriptions, identify the type of each adjusting entry prepared in part a above.

Question c. Although Florida Palms's clubhouse building is fully depreciated, it is in excellent physical condition. Explain how this can be