Instructions

From an analysis of the T-accounts, reconstruct (a) the October transaction entries, and (b) the adjusting journal entries that were made on October 31, 2020. Prepare explanations for each journal entry.

E3.10 (LO 3) (Adjusting Entries) Greco Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows.

Greco Resort Trial Balance August 31, 2020
		Debit		Credit
Cash		$ 19,600
Prepaid Insurance		4,500
Supplies		2,600
Land		20,000
Buildings		120,000
Equipment		16,000
Accounts Payable				$ 4,500
Unearned Rent Revenue				4,600
Mortgage Payable				60,000
Common Stock				91,000
Retained Earnings				9,000
Dividends		5,000
Rent Revenue				76,200
Salaries and Wages Expense		44,800
Utilities Expenses		9,200
Maintenance and Repairs Expense		3,600
		$245,300		$245,300

Other data:

1. The balance in prepaid insurance is a one-year premium paid on June 1, 2020.

2. An inventory count on August 31 shows $450 of supplies on hand.

3. Annual depreciation rates are buildings (4%) and equipment (10%). Salvage value is estimated to be 10% of cost.

4. Unearned Rent Revenue of $3,800 was earned prior to August 31.

5. Salaries of $375 were unpaid at August 31.

6. Rentals of $800 were due from tenants at August 31.

7. The mortgage interest rate is 8% per year.