Subject 2 (25%) . ABC Hotels operates in the tourism industry. Assume that the trial-balance of ABC hotels, as of December 31,2020 is:

ABC Hotels Trial Balance December 31, 2020 Debit Credit

Cash 7,500

Accounts Receivable 6,500

Allowance for Doubtful Accounts .................................................................................... 550

Prepaid Insurance ................................................................................................ 4,500

Land ..........................................................................................................................175,000

Buildings 60,000

Accumulated DepreciationBuildings ................................................................ 19,200

Equipment .............................................................................................................. 75,000

Accumulated DepreciationEquipment ................................................................ 35,000

Share Capital .................................................................................................................... 200,000

Retained Earnings ................................................................................................ 41,000

Revenues from accommodation...................................................................................... 100,000

Revenues from renting hotel facilities ................................................................ 2,950

Revenues from restaurants ............................................................................................. 8,800

Utilities Expense ...........................................................................................27,000

Salaries and Wages Expense ............................................................................40,000

Maintenance and Repairs Expense ................................................................ 12,000

Totals ................................................................................................ 407,500 407,500

Required:

Based on the trial-balance and the information provided below, prepare adjusting entries and post them to the general ledger. (20%)

a. The estimated useful life of the buildings is 40 years with insignificant residual value. The firm implements the straight-line depreciation method.

b. The depreciation rate for equipment is 15% per year. The salvage value of the equipment is zero and the firm uses the straight-line depreciation method.

c. During the year expired an insurance policy of 1,750.

d. The amount of Revenues from renting hotel facilities present the amount received for 10 months for renting sporting facilities of the hotel to a local sporting club. The rents for November and December have not yet been received.

e. It is estimated that 10% of the accounts receivable will not be collected.

f. The expenses for salaries and wages for months November and December amount to 1,800. This amount will be paid during the fiscal period of 2021.

g. The firm has received in advance from customers the amount of 4,450. The amount refers to accommodation services that will be provided to customers during the summer of 2021. The amount received was recorded as a revenue of the closing year.

Additioanally prepare adjusted trial balance and the closing entries and post them to the ledger.

Additional information

a. Assume that the amounts presented in the trial balance are already posted in the general ledger accounts.

b. Firms tax rate is 20%.

c. The fiscal year of ABC Hotels commences on January 1 and ends on December 31 of each year.