P4-12B The following is the unadjusted trial balance for Rocky Mountain Resort Inc. At its year end, August 31, 2018. The company adjusts its accounts annually.(the question page 227 from financial accounting by kimmel canadian 7th edition)

Debit Credit

Cash $38,820

Supplies 6,990

Prepaid insurance 12,720

Land 70,000

Buildings 290,000

Accumulated depreciation-buildings $87,000

Furniture 57,200

Accumulated depreciation-furniture 22,880

Accounts payable 13,000

Unearned revenue 71,000

Mortgage payable , due 2021 120,000

Common shares 40,000

Retained earnings 72,000

Divindeds declared 10,000

Rent revenue 497,000

Salaries expense 306,000

Utilities expense 75,200

Repairs and maintenance expense 28,250

Interest expense 7,700

Income tax expense 20,000

$922,880 $922,880

Additional information:

1- The one-year insurance policy was purchased on May 31 for $12,720

2- A count of supplies on August 31 shows $1,380 of supplies on hand.

3 The building have an estimated useful life of 50 years and straight line depreciation is applied.

4- The furniture has an estimated useful life of 10 years and straight line depreciation is applied.

5 - Customers must pay a $200 deposit if they want to book a cottage during the peak period. An analysis of these booking indicates 355 deposits were received and credited to Unearned Revenue. Only 45 of these deposits have not been earned by August 31.

6- Salaries of $1,680 were unpaid at August 31.

7- The August utility bill of $3,120 has not yet been recorded or paid.

8- On August 25, a local business contracted with Rocky Mountain to rent one of the cottages for six months, starting October1, at a rate of $3,000 per month. An advance payment equal to two months (October and November) rent was received on August 31 and credited to Rent Revenue.

9- Interest on the mortgage payable is $700 for the month of August and due September 1.

10- Income tax payable is estimated to be $2,000.

11 -During the month of May, $5,000 of common shares were issued (Note: this has already been recorded.)

Instructions:

(a) Prepare adjusting journal entries for the year.

(b)Set up T accounts, enter any opening balances, and post the adjusting journal entries prepared in part (a).

(c) Prepare an adjusted trial balance at August 31.

(d) Prepare (1) an income statement , (2) a statement of changes in equity , and (3) a statement of financial position. Note that there was no change in common share during the year.

(e) A friend of yours is considering investing in the company and asks you to comment on the results of operations and financial position. Is the company performing well or not? Does the financial position look healthy or weak? Use specific information from the financial statements to support your answer.