Obi-Wan Resort opened for business on June 1 with eight air-conditioned units.

Its trial balance before adjustment on August 31 is presented here:

Other data:
1. Insurance expires at the rate of $300 per month.
2. An inventory count on August 31 shows $900 of supplies on hand.
3. Annual depreciation is $4,800 on cottages and $2,400 on furniture.
4. Unearned rent of $5,000 was earned prior to August 31.
5. Salaries of $400 were unpaid at August 31.
6. Rentals of $800 were due from tenants at August 31. (Use Accounts Receivable.)
7. The mortgage interest rate is 12% per year. (The mortgage was taken out August 1.)
Instructions

(a) Journalize the adjusting entries on August 31 for the 3-month period June 1—August 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 August 31.

(d) Prepare an income statement and a retained earnings statement for the 3 months ended August 31 and a balance sheet as of August 31.

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

Transcribed Image Text:

Cash OBI-WAN RESORT Trial Balance August 31, 2001 Debit $ 19,600 5,400 3,300 Credit Prepaid Insurance Supplies Land 25,000 Cottages 125,000 Furniture 26,000 Accounts Payable $ 6,500 Unearned Rent Revenue 6,800 Mortgage Payable 80,000 Common Stock 100,000 Dividends 5,000 Rent Revenue 80,000 Salaries Expense 51,000 Utilities Expense 9,400 Repair Expense 3,600 $273,300 $273,300