The Highland Cove Resort Inc. opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows:

Other data:
1. Insurance expires at the rate of \(\$ 300\) per month.
2. An inventory count on August 31 shows \(\$ 700\) of supplies on hand.
3. Annual depreciation is \(\$ 4,800\) on cottages and \(\$ 2,400\) on furniture.
4. Unearned rent of \(\$ 5,000\) was earned prior to August 31 .
5. Salaries of \(\$ 400\) were unpaid at August 31 .
6. Rentals of \(\$ 800\) were due from tenants at August 31. (Use Accounts Receivable.)
7. The mortgage interest rate is \(12 \%\) per year. (The mortgage was taken out on August 1.)
\section*{Instructions}

(a) Journalize the adjusting entries on August 31 for the 3-month period June 1August 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 August 31.

(d) Prepare an income statement and a retained earnings statement for the 3 months ending August 31 and a balance sheet as of August 31.
Prepare adjusting entries and financial statements. \((505,6,7)\)

Transcribed Image Text:

HIGHLAND COVE RESORT INC. Trial Balance August 31, 1996 Cash Prepaid Insurance Supplies Debit Credit $ 19,600 5,400 3,300 Land 25,000 Cottages Furniture 125,000 26,000 Accounts Payable $ 6,500 Unearned Rent Revenue 6,800 Mortgage Payable 80,000