The Palpatine Hotel opened for business on May 1, 2001. 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 $1,200 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.
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 balance sheet at May 31.

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

Transcribed Image Text:

Cash PALPATINE HOTEL Trial Balance May 31, 2001 Debit $ 2,500 1,800 Credit Prepaid Insurance Supplies Land Lodge Furniture 1,900 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