The River Run Motel opened for business on May 1, 1998. Here is its trial balance before adjustment on May 31:

Other data:
1. Insurance expires at the rate of \(\$ 200\) per month.
2. An inventory of supplies shows \(\$ 1,350\) of unused supplies on May 31.
3. Annual depreciation is \(\$ 3,600\) on the lodge and \(\$ 3,000\) on furniture.
4. The mortgage interest rate is \(12 \%\). (The mortgage was taken out on May 1.)
5. Unearned rent of \(\$ 1,500\) has been earned.
6. Salaries of \(\$ 300\) are accrued and unpaid at May 31.
\section*{Instructions}

(a) Journalize the adjusting entries on May 31.

(b) Prepare a ledger using \(\mathrm{T}\) 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 balance sheet at May 31.

(e) Identify which accounts should be closed on May 31.

Transcribed Image Text:

Cash RIVER RUN MOTEL Trial Balance May 31, 1998 Debit $ 2,500 1,800 Prepaid Insurance Credit Supplies 1,900 Land Lodge Furniture 15,000 70,000 16,800 Accounts Payable Unearned Rent Revenue Mortgage Payable $ 4,700 3,600 35,000 Common Stock 60,000 Rent Revenue 9,200 Salaries Expense 3,000 Utilities Expense 1,000 Advertising Expense 500 $112,500 $112,500