Prepare adjusting entries, post, and prepare adjusted trial balance and financial statements.

(LO 2, 3, 4)

Mac's Motel opened for business on May 1, 2017. Its trial balance before adjustment on May 31 is as follows.

MAC'S MOTEL

Trial Balance

May 31, 2017

Account Number

Debit

Credit

101

Cash

$ 3,500

126

Supplies

2,080

130

Prepaid Insurance

2,400

140

Land

12,000

141

Buildings

60,000

149

Equipment

15,000

201

Accounts Payable

$4,800

208

Unearned Rent Revenue

3,300

275

Mortgage Payable

40,000

301

Owner's Capital

41,380

429

Rent Revenue

10,300

610

Advertising Expense

600

726

Salaries and Wages Expense

3,300

732

Utilities Expense

900

$99,780

$99,780

In addition to those accounts listed on the trial balance, the chart of accounts for Mac's Motel also contains the following accounts and account numbers: No. 142 Accumulated DepreciationBuildings, No. 150 Accumulated DepreciationEquipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation Expense, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.

Other data:

1.Prepaid insurance is a 1-year policy starting May 1, 2017.

2.A count of supplies shows $750 of unused supplies on May 31.

3.Annual depreciation is $3,000 on the buildings and $1,500 on equipment.

4.The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)

5.Two-thirds of the unearned rent revenue has been earned.

6.Salaries of $750 are accrued and unpaid at May 31.

Instructions

(a)

Journalize the adjusting entries on May 31.

(b)

Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.)

(c)

Prepare an adjusted trial balance on May 31.

Adj. trial balance $101,305

(d)

Prepare an income statement and an owner's equity statement for the month of May and a balance sheet at May 31.

Net income $4,645

Ending capital $46,025

Total assets $93,075

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