The Vang Hotel opened for business on May 1, 2012. Here is its trial balance bef

Question

The Vang Hotel opened for business on May 1, 2012. Here is its trial balance before adjustment on May 31. VANG HOTEL Trial Balance May 31, 2012 Debit Credit Cash $ 2,500 Prepaid Insurance 1,800 Supplies 2,600 Land 15,000 Buildings 70,000 Equipment 16,800 Accounts Payable $ 4,700 Unearned Rent Revenue 3,300 Mortgage Payable 36,000 Common Stock 60,000 Rent Revenue 9,000 Salaries and Wages Expense 3,000 Utilities Expense 800 Advertising Expense 500 $113,000 $113,000 Other data: 1. Insurance expires at the rate of $450 per month. 2. A count of supplies shows $1,050 of unused supplies on May 31. 3. Annual depreciation is $3,600 on the building and $3,000 on equipment. 4. The mortgage interest rate is 6%. (The mortgage was taken out on May 1.) 5. Unearned rent of $2,500 has been earned. 6. Salaries of $900 are accrued and unpaid at May 31. Instructions (a) Journalize the adjusting entries on May 31. (b) Prepare a ledger using T accounts. Enter the trial balance amounts and post the adjusting entries. (c) Prepare an adjusted trial balance on May 31. (d) Prepare an income statement and a retained earnings statement for the month of May and a classified balance sheet at May 31. (e) Identify which accounts should be closed on May 31.

Explanation / Answer

1. Insurance expires at the rate of $300 per month. Dr Insurance Expense 300 Cr Prepaid Insurance 300 2. A count of supplies shows $1,050 of unused supplies on May 31. Dr Supplies Expense 1,550 Cr Supplies 1,550 3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture. Dr Depreciation Expense, Lodge 300 Cr Accumulated Depreciation, Lodge 300 Dr Depreciation Expense, Furniture 250 Cr Accumulated Depreciation, Furniture 250 4. The mortgage interest rate is 7%. (The mortgage was taken out on May 1.) Dr Interest Expense 210 Cr Interest Payable 210 5. Unearned rent of $2,500 has been earned. Dr Unearned Rent Revenue 2,500 Cr Rent Revenue 2,500 6. Salaries of $750 are accrued and unpaid at May 31. Dr Salaries Expense 750 Cr Salaries Payable 750 step 2: Prepare a ledger using T accounts. Enter the trial balance amounts and post the adjusting entries. step 3:Complete the Adjusted Trial Balance as of May 31. I'll let you try these two yourself. step 4: Complete the income statement and a retained earnings statement for the month of May and a classified balance sheet at May 31. Income Statement Rent Revenue. . . . . . . . . . . . . . . . . . .. . . $11,500 Expenses: Salaries Expense. . . . . . . . ... .$3,750 Utilities Expense. . . . . . . . . . . .. . 800 Advertising Expense. . . . . . . . . . . 500 Insurance Expense. . . . . . . . . . . . 300 Supplies Expense . . . . . . . . . . . 1,550 Depreciation Expense, Lodge . . . . .300 Depreciation Expense, Furniture. . . 250 Interest Expense . . . . . . . . . . . . . .210 Total Expenses.. . . . . . . . . . . . . . . . . . . . ..7,660 Net Income. . . . . . . . . . . . . . . . . . . . . . . .$3,840 Balance Sheet Current Assets Cash. . . . . . . . . . . . . . . . . . . . ....$2,500 Prepaid Insurance. . . . . . . . . . . .....1,500 Supplies. . . . . . . . . . . . . . . . . . .....1,050 Total Current Assets . . . . . . . . . . . . . . . . . . .5,050 Property, Plant, and Equipment Land. . . . . . . . . . . . . . . . . . . . ...... . . . . . ..15,000 Lodge. . . . . . . . . . . . . . . . . . . .....70,000 Less: Accumulated Depreciation. . . . .300.. . 69,700 Furniture. . . . . . . . . . . . . . . . . . . .16,800 Less: Accumulated Depreciation. . . . .250.. . 16,550 Total Assets. . . . . . . . . . . . . . . . . . . . . . . 106,300 Liabilities: Accounts Payable. . . . . . . . . . .. . . 4,700 Interest Payable. . . . . . . . . . . . . . . . .210 Salaries Payable. . . . . . . . . . . . . . . . 750 Unearned Rent Revenue. . . . . . . . . . .800 Mortgage Payable. . . . . . . . . . . . .36,000 Total Liabilities. . . . . . . . . . . . . . . . . . . . . . 42,460 Stockholders' Equity: Common Stock. . . . . . . . . . . . . . .60,000 Retained Earnings. . . . . . . . . . . . . .3,840. . 63,840 Total Liabilities and Stockholders' Equity. . . . . . . . . . . . . . . . $106,300 step 5: Indicate which accounts should be closed on May 31. All Revenue and Expense accounts should be closed

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