Debit Credit 500 1.Insurance expires at the rate of $450 per month.2.A count of

Question

Debit

Credit

500

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.(a) Annual depreciation is $3,600 on the building.(b) Annual depreciation is $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.

Prepare an income statement for the month of May.

Prepare a retained earnings statement for the month of May.

Prepare a classified balance sheet at May 31.

Identify which accounts should be closed on May 31.

SOLO HOTEL
Trial Balance
May 31, 2014

Debit

Credit

Cash $ 2,500 Supplies 2,600 Prepaid Insurance 1,800 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

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.(a) Annual depreciation is $3,600 on the building.(b) Annual depreciation is $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.

Prepare an income statement for the month of May.

Prepare a retained earnings statement for the month of May.

Prepare a classified balance sheet at May 31.

Identify which accounts should be closed on May 31.

Explanation / Answer

SOLO HOTEL

Trial Balance

May 31, 2014

Debit

Credit

Cash

$ 2,500

Supplies

$ 1,050

Prepaid Insurance ($1,800-$450)

$ 1,350

Land

$ 15,000

Buildings

$ 70,000

Accumulated depreciation - Buildings ($3,600/12)

$ 300

Equipment

$ 16,800

Accumulated depreciation - Equipment ($3,000/12)

$ 250

Accounts Payable

$ 4,700

Unearned Rent Revenue ($3,300-$2,500)

$ 800

Mortgage Payable

$ 36,000

Common Stock

$ 60,000

Rent Revenue ($9,000 + $2,500)

$ 11,500

Interest payable ($36,000 * 6% *1/12)

$ 180

Salaries and Wages payable

$ 900

Salaries and Wages Expense ($3,000 + $900)

$ 3,900

Utilities Expense

$ 800

Advertising Expense

$ 500

Insurance expense

$ 450

Supplies expense ($2,600-$1,050)

$ 1,550

Depreciation expense ($300 + $250)

$ 550

Interest expense

$ 180

$ 114,630

$ 114,630

Income Statement

For the month ending May 31, 2014

Revenues

Rent revenue

$ 11,500

Expenses

Salaries and Wages Expense

$ 3,900

Utilities Expense

$ 800

Advertising Expense

$ 500

Insurance expense

$ 450

Supplies expense

$ 1,550

Depreciation expense

$ 550

Interest expense

$ 180

$ 7,930

Net income

$ 3,570

SOLO HOTEL

Statement of Retained Earnings

Month Ended May 31, 2014

Retained earnings, May 1

$ 0

Add: Net income

$ 3,570

Retained earnings, May 31

$ 3,570

SOLO HOTEL

BALANCE SHEET

May 31, 2014

Assets

Current assets

Cash

$ 2,500

Supplies

$ 1,050

Prepaid Insurance ($1,800-$450)

$ 1,350

Total current assets

$ 4,900

Land

$ 15,000

Buildings

$ 70,000

Less: Accumulated depreciation - Buildings

$ 300

$ 69,700

Equipment

$ 16,800

Less: Accumulated depreciation - Equipment

$ 250

$ 16,550

Total assets

$ 106,150

Liabilities and Shareholders’ Equity

Current liabilities

Accounts Payable

$ 4,700

Unearned Rent Revenue ($3,300-$2,500)

$ 800

Interest payable ($36,000 * 6% *1/12)

$ 180

Salaries and Wages payable

$ 900

Total current liabilities

$ 6,580

Mortgage payable

$ 36,000

Total liabilities

$ 42,580

Shareholders’ equity

Common shares

$ 60,000

Retained earnings

$ 3,570

Total shareholders’ equity

$ 63,570

Total liabilities and shareholders’ equity

$ 106,150

SOLO HOTEL

Trial Balance

May 31, 2014

Debit

Credit

Cash

$ 2,500

Supplies

$ 1,050

Prepaid Insurance ($1,800-$450)

$ 1,350

Land

$ 15,000

Buildings

$ 70,000

Accumulated depreciation - Buildings ($3,600/12)

$ 300

Equipment

$ 16,800

Accumulated depreciation - Equipment ($3,000/12)

$ 250

Accounts Payable

$ 4,700

Unearned Rent Revenue ($3,300-$2,500)

$ 800

Mortgage Payable

$ 36,000

Common Stock

$ 60,000

Rent Revenue ($9,000 + $2,500)

$ 11,500

Interest payable ($36,000 * 6% *1/12)

$ 180

Salaries and Wages payable

$ 900

Salaries and Wages Expense ($3,000 + $900)

$ 3,900

Utilities Expense

$ 800

Advertising Expense

$ 500

Insurance expense

$ 450

Supplies expense ($2,600-$1,050)

$ 1,550

Depreciation expense ($300 + $250)

$ 550

Interest expense

$ 180

$ 114,630

$ 114,630

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