The following is the unadjusted trial balance for Rainbow Lodge Ltd. at its year end, May 31. The company adjusts its accounts monthly.

Additional information:
1. The annual insurance policy was purchased on October 1, 2011, for $10,920.
2. A count of supplies shows $1,340 of supplies on hand on May 31.
3. The building has an estimated useful life of 20 years.
4. The furniture has an estimated useful life of five years.
5. Customers must pay a $100 deposit if they want to book a room in advance during the peak period. An analysis of these bookings indicates that 175 deposits were received and credited to Unearned Revenue. By May 31, 25 of the deposits were earned.
6. On May 25, a local business contracted with Rainbow Lodge to rent one of its housekeeping units for four months, starting June 1, at a rate of $2,800 per month. An advance payment equal to one month's rent was paid on May 25 and credited to Rent Revenue.
7. On May 31, Rainbow Lodge has earned $1,780 of rent revenue from customers who are currently staying at the inn. The customers will only pay the amount owing when they check out in early June.
8. Salaries of $1,590 are unpaid at May 31.
9. The mortgage interest rate is 8%. Interest has been paid to May 1; the next payment is due June 1.
10. The May utility bill of $2,240 has not yet been recorded or paid.
11. Income taxes for the month of May are estimated to be $1,000.
12. During the month of May, $4,000 of common shares were issued.
Instructions
(a) Prepare T accounts, and enter the trial balance amounts.
(b) Prepare and post the adjusting journal entries for the month.
(c) PrepareanadjustedtrialbalanceatMay31.
(d) Prepare an income statement, statement of changes in equity, and statement of financial position for the year.
(e) A friend of yours is considering investing in the company and asks you to comment on the company's 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.

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RAINBOW LODGE LTD Trial Balance May 31, 2012 Debit 6,400 11,800 Credit Accounts receivable Supplies Prepaid insurance Land Building Accumulated depreciation-building Furniture Accumulated depreciation-furniture Accounts payable Unearned revenue Mortgage payable, due in 2016 Common shares Retained earnings Dividends Rent revenue Salaries expense Utilities expense Interest expense Insurance expense Advertising expense Income tax expense 106,370 168,000 16,100 33,600 12,880 9,400 17,500 126,000 60,000 44,580 9 2,000 $200,320 $ 98,700 26,600 9,240 3,640 1,000 10,000 486,780 86,780