Question

P3-2A Mac's Motel opened for business on May 1, 2017. Its trial balance before adjust ment on May 31 is as follows. Prepare adjusting entries, post, and prepare adjusted Trial balance and financial statements (LO 2, 3, 4) MAC'S MOTEL Trial Balance May 31, 2017 Credit GLS Account Number 101 126 130 140 141 149 Debit $ 3,500 2.080 2,400 12,000 60,000 15,000 201 208 275 301 429 610 726 732 Cash Supplies Prepaid Insurance Land Buildings Equipment Accounts Payable Unearned Rent Revenue Mortgage Payable Owner's Capital Rent Revenue Advertising Expense Salaries and Wages Expense Utilities Expense $ 4,800 3,300 40,000 41.380 10,300 600 3,300 900 $99,780 $99.780 In addition to those accounts listed on the trial balance, the chart of accounts for Mac's Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation Buildings, No. 150 Accumulated Depreciation Equipment, No. 212 Sala- ries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation Expense, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1. Prepaid insurance is a 1-year policy starting May 1, 2017. 2. A count of supplies shows $750 of unused supplies on May 31. 3. Annual depreciation is $3,000 on the buildings and $1,500 on equipment. 4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.) 5. Two-thirds of the unearned rent revenue has been earned. 6. Salaries of $750 are accrued and unpaid at May 31. 40 3 Adjusting the Accounts (c) Adj. trial balance $101,305 (d) Net income 54,645 Ending capital $46,025 Total assets $93,075 Instructions (a) Journalize the adjusting entries on May 31. (b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use Jl as the posting reference.) (c) Prepare an adjusted trial balance on May 31. (d) Prepare an income statement and an owner's equity statement for the month of May and a balance sheet at May 31.

Answer 1

Mac's Motel Adjusting Enteries Trans. Particulars 1 Insurance Expense a/c Dr. To Prepaid Insurance (Insurance expensed) 2400 / 12 = 200 Debit in $ Credit in $ 200 200 Dr. 1330 Supplies Expense a/c To Supplies (Supplies expensed) 2080 - 750 1330 250 Depreciation Expense a/c Dr. To Accum. Depre - Build (To record depreciation) 3000 / 12 = 250 250 125 Depreciation Expense a/c Dr. To Accum. Depre - Equip (To record depreciation) 1500 / 12 = 125 125 4 400 Interest Expense a/c Dr. To Interest Payable (Interest accrued)40000 x 12% x/12 400 I 5 2200 Unearned Rent Revenue a/c Dr. To Rent Revenue (Rent revenue earned) 3300 x 2/3 2200 6 750 Salaries and Wages expense a/c Dr. To Salary and Wages Payable (Salary accrued) 400 x 5 750

Worksheet For the period ending 31.5.2017 200 Acct. No Particulars 101 Cash 126 Supplies 130 Prepaid Insurance 140 Land 141 Building 142 Accum. Depre - Build 149 Equipment 150 Accum. Depre - Equip 201 Accounts Payable 208 Unearned Rent Revenue Salary and Wages Payable 230 Interest Payable 275 Mortgage Payable 301 Owner's Capital 429 Rent Revenue 610 Advertising Expense 619 Depreciation Expense 631 Supplies Expense 718 Interest Expense 722 Insurance Expense 726 Salaries and Wages expense 732 Utilities Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 3500 3500 2080 1330 750 2400 2200 12000 12000 60000 60000 250 250 15000 15000 125 125 4800 4800 3300 2200 1100 750 750 400 400 40000 40000 41380 41380 10300 2200 12500 600 600 375 375 1330 1330 400 400 200 200 3300 750 4050 900 900 99780 9978052555255 101305 101305

12500 Statement of Income For the period ending 31.5.2017 Rent Revenue Less: Advertising Expense Depreciation Expense Supplies Expense Interest Expense Insurance Expense Salaries and Wages expense Utilities Expense Net Income 600 375 1330 400 200 4050 900 7855 4645 Statement of Owner's Equity For the period ending 31.5.2017 Owner's Capital Net Income 41380 4645 46025

Amounts in $ Amounts in $ Balance sheet As at 31.12.2017 Assets Current Assets Cash Supplies Prepaid Insurance Amounts in $ Amounts in $ Liabilities Current Liabilities 3500 Accounts Payable 750 Unearned Rent Revenue 2200 6450 Salary and Wages Payable Interest Payable 4800 1100 750 400 7050 40000 Non Current Assets Land Building Accum. Depre - Build Equipment Accum. Depre - Equip Total Assets 60000 -250 15000 -125 12000 Non Current Liabilities Mortgage Payable 59750 Owner's Equity 14875 Owner's Capital 93075 Total Liabilities & Equity 46025 93075