Happy Trails Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is presented here.

HAPPY TRAILS RESORT Trial Balance August 31, 2007 Debit Credit Cash $ 24,600 Prepaid Insurance 5,400 Supplies 4,300 Land 40,000 Cottages 132,000 Furniture 36,000 Accounts Payable $ 6,500 Unearned Rent Revenue 6,800 Problems: Set B 205

(c) Tot. trial balance $36,680 Prepare adjusting entries, adjusted trial balance, and financial statements.

(sO’4,.5; 6; 7)

206 CHAPTER 4 Accrual Accounting Concepts

(c) Tot. trial balance $318,000

(d) Net income $ 12,250 Prepare adjusting entries and financial statements; identify accounts to be closed.

(SOr4s- 5,6, 7)

Debit Credit Mortgage Payable 120,000 Common Stock 100,000 Dividends 5,000 Rent Revenue 80,000 Salaries Expense 53,000 Utilities Expense 9,400 Repair Expense 3,600

$313,300 $313,300 Other data: 1. Insurance expires at the rate of $450 per month.

. An inventory count on August 31 shows $1,200 of supplies on hand.

. Annual depreciation is $4,800 on cottages and $4,000 on furniture.

. Unearned rent of $5,000 was earned prior to August 31.

. Salaries of $600 were unpaid at August 31.

. Rentals of $1,200 were due from tenants at August 31. (Use Accounts Receivable.)

ND uu BW NY . The mortgage interest rate is 7% 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 classified balance sheet as of August 31.

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