Question

Taylor Marina has 300 available slips that rent for $800 per season. Payments must be made in full by the start of the boating season, April 1, 2021. The boating season ends October 31, and the marina has a December 31 year-end. Slips for future seasons may be reserved if paid for by December 31, 2021. Under a new policy, if payment for 2022 season slips is made by December 31, 2021, a 5% discount is allowed. If payment for 2023 season slips is made by December 31, 2021, renters get a 20% discount (this promotion hopefully will provide cash flow for major dock repairs).On December 31, 2020, all 300 slips for the 2021 season were rented at full price. On December 31, 2021, 200 slips were reserved and paid for the 2022 boating season, and 60 slips were reserved and paid for the 2023 boating season.(a) Prepare the appropriate journal entries for December 31, 2020, and December 31, 2021.

Answer 1

Solution:

(a) Journal entries for December 31, 2020, and December 31, 2021.

                   Cash                        240,000

                   Rent Revenue                                240,000

    (2020 slips - 300 x 800 = 240,000)

                   Cash                       152,000

         Unearned Rent Revenue                          152,000

(2021 slips - 200 x 800 x (1.00 - 0.05) = 152,000)

                   Cash                        38,400

      Unearned Rent Revenue                                38,400

(2022 slips - 60 x 800 x (1.00 - 0.20) = 38,400)

(b) Rent Revenue for 2020:

Paid in 2012, earned in 2020                      152,000

Paid in 2013, earned in 2020                      80,000(100 x 800)

Total                                                                232,000