On April 1 Frank Knight incorporated and capitalized with $40,000 of his savings Waltham Oil and Lube Centers, Inc. On the same day, he signed a lease and operating agreement to operate the recently constructed "Waltham Oil and Lube Center," located in Waltham, Massachusetts. The facility and name were owned by National Oil and Lube Centers, Inc., a nationwide chain of centers offering through local franchisees automobile oil change and lubrication services.
Questions
1. Prepare journal entries for the period May 1 to July 31.
2. Based on an examination of your journal entries, at the end of July, what is the balance, if any, of the following accounts:
a. Capital
b. Accumulated depreciation
c. Prepaid assets
d. Cash balance
e. Accounts receivable
f. Liabilities
3. Based on an examination of your journal entries, for the three-month period May 1 to July 31, what is the amount of the following:
a. Withdrawals
b. Cost of sales
c. Parking revenues
d. Lease expense
e. Total revenues
4. How should Knight account for the $400 August parking checks? Possible bad debts? Family use of the Waltham Center's services?