Financial statement of Glion Hotel Inc.

Consider the books of accounts of Glion Hotel Inc. and conduct a financial analysis of the transactions made during the year.

Answer

Financial statement

Books of Accounts

STEP 1: TRANSACTIONS

Glion Hotel Inc. started on January 1st, 20x0. The business uses calendar year as its fiscal year.

Below are the transactions occurred during the first year of its operation:

1. January 1st, 20x0: Glion Hotel issued 200,000 shares of common stocks at $2.52 per share.

2. January 1st, 20x0: Glion Hotel borrowed $30,000 from Bank of Ames at annual interest rate of 4.5%. According to the note, Glion Motel will have to pay back the money in three years

(i.e. pay interest annually on December, 31st and pay the total amount borrowed at the end of the third year.).

3. January 1st, 20x0: Glion Hotel bought $420,000 worth of furniture by cash. Using straight-line depreciation method, all furniture will be fully depreciated in 18 years.

4. During the year, Glion Hotel had room sales of $142,000

5. On December 31st, 20x0, Glion Hotel paid $3,750 by cash for landscaping services performed for the hotel during the year.

6. During the year, total labor cost was $32,700. Assuming Glion Hotel pays its employees once a year on December 31st.

7. During the year, other operating cost was $38,000. Assuming Glion Hotel pays its bills once a year on December 31st.

8. Glion Hotel is built on a parcel of leased land and the annual lease charge is $13,000. On

January 1st, 20x0, to get a bargain price, Glion Hotel paid the landlord the sum of $65,000

for the lease charge of 20x0, 20x1, 20x2, 20x3, and 20x4.

9. On December 30th, 20x0, Glion Hotel received a deposit of $6,300 from Travel Agency for the reservations of 25 rooms from March 1st, 20x1 through March 20th, 20x1.

10. On December 31st, 20x0, Glion Hotel distributed dividends of 3 cents per share (Muda, 2017).

STEP 2 : JOURNAL ENTRIES

Transaction 1

$2.52 per share * 200,000 shares issued = received $504,000 cash

January 1^st 20x0

Cash $504,000

Common stock$504,000

Transaction 2

January 1^st 20x0

Cash$30,000

Bank loan$30,000

Transaction 3

January 1^st 20x0

Furniture$420,000

Cash$420,000

Transaction 4

December 31sr 20x0

Cash$142,000

Revenue – (room sales)$142,000

Transaction 5

December 31^st 20x0

Maintenance & landscaping expenses$3,750

Cash$3,750

Transaction 6

December 31^st 20x0

Wage expense$32,700

Cash$32,700

Transaction 7

December 31^st 20x0

Operating expenses$38,000

Cash$38,000

Transaction 8

January 1^st 20x0

Prepaid lease$65,000

Cash$65,000

December 31^st 20x0

Lease expense$13,000

Prepaid lease$13,000

Transaction 9

December 30^th 20x0

Cash$6,300

Unearned revenues$6,300

Transaction 10

3 cents per share on 200,000 shares means $6,000

December 31^st

Dividends$6,000

Cash$6,000

Transaction 11 (interest expense from transaction 2)

December 31^st 20x0

Interest expense$1,350

Cash$1,350

Transaction 12 (depreciation from transaction 3)

December 31^st 20x0

Depreciation expense- furniture$23,333.33

Accumulated depreciation- furniture$23,333.33

(Prentice, Bills, & Peters, 2018)

TRANSACTION 3: LEDGER/ T-ACCOUNTS

Cash
Debit		Credit
Jan-01	$ 504,000	Jan-01	$ 420,000
Jan-01	$ 30,000	Jan-01	$ 65,000
Dec-30	$ 6,300	Dec-31	$ 3,750
Dec-31	$ 142,000	Dec-31	$ 32,700
		Dec-31	$ 38,000
		Dec-31	$ 1,350
		Dec-31	$ 6,000
balance	$ 115,500

prepaid lease

Debit

Credit

Jan-01

$ 65,000

Dec-31

$ 13,000

balance

$ 52,000

Furniture

Debit

Credit

Jan-01

$ 420,000

balance

$ 420,000

accumulated depreciation- furniture

Debit

Credit

Dec-31

$ 23,333.33

balance

$ 23,333.33

bank loan

Debit

Credit

Jan-01

$ 30,000

balance

$ 30,000

common stock

Debit

Credit

Jan-01

$ 504,000

balance

$ 504,000

Revenue

Debit

Credit

Jan-01

$ 142,000

balance

$ 142,000

maintenance and landscaping expenses

Debit

Credit

Dec-31

$ 3,750

balance

$ 3,750

wage expense

Debit

Credit

Dec-31

$ 32,700

balance

$ 32,700

operating expenses

Debit

Credit

Dec-31

$ 38,000

balance

$ 38,000

lease expenses

Debit

Credit

Dec-31

$ 13,000

balance

$ 13,000

interest expense

Debit

Credit

Dec-31

$ 1,350

balance

$ 1,350

depreciation expense- furniture

Debit

Credit

Dec-31

$23,333.33

balance

$23,333.33

unearned revenue

Debit

Credit

Jan-01

$ 6,300

balance

$ 6,300

Dividends

Debit

Credit

Dec-31

$ 6,000

balance

$ 6,000

STEP 4: TRIAL BALANCE

For preparing the trial balance, the debit and credit balances are taken on the respective side of the trial balance. These balances at the end of the trial balance match, if the trial balance and the previous accounts have been prepared with accuracy. The important things to keep in mind are putting the balances in the correct side of the statement (Easton, & Sommers, 2018). The assets and expenses are usually put on the debit balance side, while the liabilities, equity and revenues take the credit side of the statement. For Glion Hotel Inc. the trial balance is as follows (Tassadaq, & Malik, 2015).

GLION HOTEL INC.
Trial Balance
December 31, 20x0
ACCOUNT	DEBIT	CREDIT
cash	$ 115,500
pre-paid lease	$ 52,000
furniture	$ 420,000
accumulated depreciation furniture		$ 23,333.33
bank loan		$ 30,000
common stock		$ 504,000
revenue		$ 142,000
maintenance expense	$ 3,750
wage expense	$ 32,700
operating expense	$ 38,000
lease expense	$ 13,000
interest expense	$ 1,350
depreciation expense- furniture	$ 23,333.33
unearned revenue		$ 6,300
dividends	$ 6,000
total	$ 705,633.33	$ 705,633.33

The debit and credit balance of the trial balance is matching which shows that the ledger accounts have been prepared with all accuracy (Robinson , et al. 2015).

STEP 5: INCOME STATEMENT

INCOME STATEMENT
GLION HOTEL INC.
For the period January 1st 20x0 to December 31st 20x0
revenue
room revenue	$ 142,000.00

expenses
maintenance & landscaping expenses	$ 3,750.00
operating expenses	$ 38,000.00
wage expenses	$ 32,700.00
lease expenses	$ 13,000.00
interest expenses	$ 1,350.00
depreciation expenses	$ 23,333.33

earning before tax	$ 29,866.67

Income tax (35%)	$ 10,453.33

net income	$ 19,413.34

Through the income tax of $10,453.33, the cash account shall get reduced to $105,046.67 (Öztürk, & Serçemeli,2016).

STEP 6: STATEMENT OF RETAINED EARNINGS

STATEMENT OF RETAINED EARNINGS
GLION HOTEL INC.
for the year ending December 31, 20x0
balance on January 1	$ -
net income	$ 19,413.34
(dividends)	$ 6,000.00
balance on December 31st	$ 13,413.34

STEP 7: BALANCE SHEET

BALANCE SHEET
GLION HOTEL INC.
For the year ending December 31st 20x0
assets
cash	$ 105,046.67
pre-paid lease	$ 52,000.00
furniture	$ 396,666.67
($420,000-$23,333.33)
total assets	$ 553,713.34
liabilities & owner's equity
liabilities
bank loan	$ 30,000.00
unearned revenues	$ 6,300.00

owner's equity
common stock	$ 504,000.00
retained earnings	$ 13,413.34
total liabilities and owner's equity	$ 553,713.34

The balance sheet has followed the accounting equation of:

ASSETS= LIABILITIES + OWNER’S EQUITY

(Crowther, 2018).

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Financial statement of Glion Hotel Inc.

Answer

STEP 1: TRANSACTIONS

STEP 2 : JOURNAL ENTRIES

TRANSACTION 3: LEDGER/ T-ACCOUNTS

STEP 4: TRIAL BALANCE

STEP 5: INCOME STATEMENT

STEP 6: STATEMENT OF RETAINED EARNINGS

STEP 7: BALANCE SHEET

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