P3-2A. Answer
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Answer P3-2A Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. NEOSHO RIVER RESORT Trial Balance August 31, 2010 Account Number 101 126 130 140 143 149 201 209 275 301 306 429 622 726 732
Debit $19,600 3,300 6,000 25,000 125,000 26,000
Cash Supplies Prepaid Insurance Land Cottages Furniture Accounts Payable Unearned Rent Mortgage Payable P. Harder, Capital P. Harder, Drawing Rent Revenue Repair Expense Salaries Expense Utilities Expense
Credit
$6,500 7,400 80,000 100,000 5,000 80,000 3,600 51,000 9,400 $273,900
$273,900
In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation-Cottages, No. 150 Accumulated Depreciation-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, No. 621 Depreciation Expense-Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1. 2. 3. 4. 5. 6. 7.
Insurance expires at the rate of $400 per month. A count on August 31 shows $600 of supplies on hand. Annual depreciation is $6,000 on cottages and $2,400 on furniture. Unearned rent of $4,100 was earned prior to August 31. Salaries of $400 were unpaid at August 31. Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.) The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Instructions (a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. J1 Date Aug.
Account/Description 31
Debit
Insurance Expense
Credit 1,200
Prepaid Insurance
1,200
(To record expired insurance) 31
Supplies Expense
2700
Supplies
2700
(To record supplies used) 31
Depreciation Expense
Cottages
1,500
Acc. Depr.-Cottages
1,500
(To record cottage depreciation) 31
1 of 5
Depreciation Expense
Furniture
600
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P3-2A. Answer
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Acc. Depr.-Furniture
600
(To record furniture depreciation) 31
Unearned Rent
4100
Rent Revenue
4100
(To record rent earned) 31
Salaries Expense
400
Salaries Payable
400
(To record accrued wages) 31
Accounts Receivable
1000
Rent Revenue
1000
(To record accrued rent) 31
Interest Expense
600
Interest Payable
600
(To record interest expense) (b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.) (If an amount should be blank, enter a zero. All boxes must be filled to be correct.) Cash Date Aug.
Explanation 31
Balance
Accounts Receivable Date Explanation Aug. 31 Adjusting Supplies Date Aug. 31 31
Explanation Balance Adjusting
Prepaid Insurance Date Explanation Aug. 31 Balance 31 Adjusting
Ref.
Credit
Ref. J1
Debit 1000
Credit 0
Ref. P
Debit
Credit
0
2,700
Debit
Credit
0
1,200
J1
Ref. P J1
No. 101 Balance 19600
P
No. 112 Balance 1,000 No. 126 Balance 3,300 600 No. 130 Balance 6,000 4,800
Land Date Aug. 31
Explanation Balance
Ref. P
Debit
Credit
No. 140 Balance 25,000
Cottages Date Aug. 31
Explanation Balance
Ref. P
Debit
Credit
No. 143 Balance 125,000
Debit 0
Credit 1,500
Debit
Credit
Debit 0
Credit 600
Accumulated Depreciation—Cottages Date Explanation Ref. Aug. 31 Adjusting J1 Furniture Date Explanation Aug. 31 Balance
Ref. P
Accumulated Depreciation—Furniture Date Explanation Ref. Aug. 31 Adjusting J1 Accounts Payable
2 of 5
Debit
No. 144 Balance 1,500 No. 149 Balance 26,000 No. 150 Balance 600 No. 201
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P3-2A. Answer
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Date Aug. 31
Explanation Balance
Ref. P
Debit
Credit
Unearned Date Aug. 31 31
Rent Explanation Balance Adjusting
Ref. P
Debit
Credit
J1
4,100
0
No. 208 Balance 7,400 3,300
Salaries Payable Date Explanation Aug. 31 Adjusting
Ref. J1
Debit 0
Credit 400
No. 212 Balance 400
Interest Payable Date Explanation Aug. 31 Adjusting
Ref. J1
Debit 0
Credit 600
No. 230 Balance 600
Mortgage Payable Date Explanation Aug. 31 Balance
Ref. P
Debit
Credit
No. 275 Balance 80,000
Debit
Credit
No. 301 Balance 100,000
Ref. P
Debit
Credit
No. 306 Balance 5,000
Ref. P
Debit
Credit
0 0
4,100 1,000
No. 429 Balance 80,000 84,100 85,100
Depreciation Expense—Cottages Date Explanation Ref. Aug. 31 Adjusting J1
Debit 1,500
Credit 0
No. 620 Balance 1,500
Depreciation Expense—Furniture Date Explanation Ref. Aug. 31 Adjusting J1
Debit 600
Credit 0
No. 621 Balance 600
P. Harder, Capital Date Explanation Aug. 31 Balance P. Harder, Drawing Date Explanation Aug. 31 Balance Rent Revenue Date Explanation Aug. 31 Balance 31 Adjusting 31 Adjusting
P
J1 J1
Repair Expense Date Explanation Aug. 31 Balance
Ref. P
Debit
Credit
Supplies Expense Date Explanation Aug. 31 Adjusting
Ref. J1
Debit 2,700
Credit 0
No. 631 Balance 2,700
Interest Expense Date Explanation Aug. 31 Adjusting
Ref. J1
Debit 600
Credit 0
No. 718 Balance 600
Insurance Expense Date Explanation Aug. 31 Adjusting
Ref. J1
Debit 1,200
Credit 0
No. 722 Balance 1,200
Salaries Expense
3 of 5
Ref.
Balance 6,500
No. 622 Balance 3,600
No. 726
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P3-2A. Answer
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Date Aug. 31 31
Explanation Balance Adjusting
Utilities Expense Date Explanation Aug. 31 Balance
Ref. P J1
Ref. P
Debit
Credit
Balance 51,000
400
0
51,400
Debit
Credit
No. 732 Balance 9,400
(c) Prepare an adjusted trial balance on August 31. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.) NEOSHO RIVER RESORT Adjusted Trial Balance August 31, 2010 Debit Cash Accounts Receivable Supplies Prepaid Insurance Land Cottages Accumulated Depreciation—Cottages Furniture
Credit $19,600
$0
1,000
0
600
0
4,800
0
25,000
0
125,000
0
0
1,500
26,000
0
Accumulated Depreciation—Furniture
0
600
Accounts Payable
0
6,500
Unearned Rent
0
3,300
Salaries Payable
0
400
Interest Payable
0
600
Mortgage Payable
0
80,000
0
100,000
P. Harder, Capital P. Harder, Drawing
5,000
0
0
85,100
Depreciation Expense—Cottages
1,500
0
Depreciation Expense—Furniture
600
0
Repair Expense
3,600
0
Supplies Expense
2,700
0
Interest Expense
600
0
1,200
0
Salaries Expense
51,400
0
Utilities Expense
9,400
0
$278,000
$278,000
Rent Revenue
Insurance Expense
(d) Prepare an income statement and an owner’s equity statement for the 3 months ending August 31 and a balance sheet as of August 31. (List multiple entries from largest to smallest eg 10, 5, 3, 2. If amounts are the same, list alphabetically. For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2, with accounts payable listed first.) NEOSHO RIVER RESORT Income Statement For the Three Months Ended August 31, 2010 Revenues Rent revenue Expenses Salaries expense Utilities expense Repair expense
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$85,100 $51,400 9,400 3,600
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P3-2A. Answer
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Supplies expense Depreciation expense Insurance expense Depreciation expense Interest Expense Total expenses
2,700 1,500 1,200 600 600
cottages furniture
71,000 $14,100
Net income NEOSHO RIVER RESORT Owner's Equity Statement For the Three Months Ended August 31, 2010 P.Harder, Capital, June 1 Investment by owner Add: Net income
$0 100,000 14,100 114,100 5,000 $109,100
Less: Drawings P.Harder, Capital, August 31 NEOSHO RIVER RESORT Balance Sheet August 31, 2010 Assets Cash Accounts receivable Supplies Prepaid insurance Land Cottages Less: Acc. Depr.-cottages Furniture Less: Acc. Depr.-furniture
$19,600 1,000 600 4,800 25,000 $125,000 1,500 26,000 600
Total assets
123,500 25,400 $199,900
Liabilities and Owner's Equity Liabilities Accounts Payable Mortgage payable Unearned rent Interest payable Salaries payable Total liabilities Owner's equity P.Harder, Capital Total liabilities and owner's equity
$6,500 80,000 3,300 600 400 90,800 109,100 $199,900
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