Problem C Hillside Apartments, Inc., adjusts and closes its books each December

Question

Problem C Hillside Apartments, Inc., adjusts and closes its books each December 31. Assume the accounts for all prior years have been properly adjusted and closed. Following are some of the company’s account balances prior to adjustment on 2010 December 31:

HILLSIDE APARTMENTS, INC. Partial Trial Balance
2010 December 31                       debit                             credit

Prepaid insurance                            $7,500                                                                                                    
Supplies on hand                             7,000
Buildings                                      255,000
Accumulated deprecation – Buildings                                         96,000

Unearned rent                                                                    2,700

Salaries expense                             69,000

Rent revenue                                                                     277,500

The Prepaid Insurance account balance represents the remaining cost of a four-year insurance policy dated 2011 June 30, having a total premium of USD 12,000.

The physical inventory of the office supply stockroom indicates that the supplies on hand cost USD 3,000.

The building was originally acquired on 1994 January 1, at which time management estimated that the building would last 40 years and have a residual value of USD 15,000.

Salaries earned since the last payday but unpaid at December 31 amount to USD 5,000.
Interest earned but not collected on a savings account during the year amounts to USD 400.
The Unearned Rent account arose through the prepayment of rent by a tenant in the building for 12

months beginning 2010 October 1.
Prepare the annual year-end adjusting entries indicated by the additional data.

Explanation / Answer

Topic: Preparing trial balance and income statement from financial statement effects template – Numerical calculations required

LO: 3, 4

6. In December 2009, Milly Newton opened an organic dry-cleaning shop. The financial statement effects template below shows transactions for the month (a through h) and accounting adjustments (i through iv).

Required:

a) Prepare trial balance for December 31, 2009.

b) Prepare an income statement for Milly Newton’s first month of operations.

c) Prepare a balance sheet for December 31, 2009.

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