73510395-P3-2A-Answer

P3-2A. Answer

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Answer P3-2A Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. NEOSHO RIVER RESORT Trial Balance August 31, 2010 Account Number 101 126 130 140 143 149 201 209 275 301 306 429 622 726 732

Debit $19,600 3,300 6,000 25,000 125,000 26,000

Cash Supplies Prepaid Insurance Land Cottages Furniture Accounts Payable Unearned Rent Mortgage Payable P. Harder, Capital P. Harder, Drawing Rent Revenue Repair Expense Salaries Expense Utilities Expense

Credit

$6,500 7,400 80,000 100,000 5,000 80,000 3,600 51,000 9,400 $273,900

$273,900

In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation-Cottages, No. 150 Accumulated Depreciation-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, No. 621 Depreciation Expense-Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1. 2. 3. 4. 5. 6. 7.

Insurance expires at the rate of $400 per month. A count on August 31 shows $600 of supplies on hand. Annual depreciation is $6,000 on cottages and $2,400 on furniture. Unearned rent of $4,100 was earned prior to August 31. Salaries of $400 were unpaid at August 31. Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.) The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)

Instructions (a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. J1 Date Aug.

Account/Description 31

Debit

Insurance Expense

Credit 1,200

Prepaid Insurance

1,200

(To record expired insurance) 31

Supplies Expense

2700

Supplies

2700

(To record supplies used) 31

Depreciation Expense

Cottages

1,500

Acc. Depr.-Cottages

1,500

(To record cottage depreciation) 31

1 of 5

Depreciation Expense

Furniture

600

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P3-2A. Answer

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Acc. Depr.-Furniture

600

(To record furniture depreciation) 31

Unearned Rent

4100

Rent Revenue

4100

(To record rent earned) 31

Salaries Expense

400

Salaries Payable

400

(To record accrued wages) 31

Accounts Receivable

1000

Rent Revenue

1000

(To record accrued rent) 31

Interest Expense

600

Interest Payable

600

(To record interest expense) (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.) (If an amount should be blank, enter a zero. All boxes must be filled to be correct.) Cash Date Aug.

Explanation 31

Balance

Accounts Receivable Date Explanation Aug. 31 Adjusting Supplies Date Aug. 31 31

Explanation Balance Adjusting

Prepaid Insurance Date Explanation Aug. 31 Balance 31 Adjusting

Ref.

Credit

Ref. J1

Debit 1000

Credit 0

Ref. P

Debit

Credit

0

2,700

Debit

Credit

0

1,200

J1

Ref. P J1

No. 101 Balance 19600

P

No. 112 Balance 1,000 No. 126 Balance 3,300 600 No. 130 Balance 6,000 4,800

Land Date Aug. 31

Explanation Balance

Ref. P

Debit

Credit

No. 140 Balance 25,000

Cottages Date Aug. 31

Explanation Balance

Ref. P

Debit

Credit

No. 143 Balance 125,000

Debit 0

Credit 1,500

Debit

Credit

Debit 0

Credit 600

Accumulated Depreciation—Cottages Date Explanation Ref. Aug. 31 Adjusting J1 Furniture Date Explanation Aug. 31 Balance

Ref. P

Accumulated Depreciation—Furniture Date Explanation Ref. Aug. 31 Adjusting J1 Accounts Payable

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Debit

No. 144 Balance 1,500 No. 149 Balance 26,000 No. 150 Balance 600 No. 201

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P3-2A. Answer

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Date Aug. 31

Explanation Balance

Ref. P

Debit

Credit

Unearned Date Aug. 31 31

Rent Explanation Balance Adjusting

Ref. P

Debit

Credit

J1

4,100

0

No. 208 Balance 7,400 3,300

Salaries Payable Date Explanation Aug. 31 Adjusting

Ref. J1

Debit 0

Credit 400

No. 212 Balance 400

Interest Payable Date Explanation Aug. 31 Adjusting

Ref. J1

Debit 0

Credit 600

No. 230 Balance 600

Mortgage Payable Date Explanation Aug. 31 Balance

Ref. P

Debit

Credit

No. 275 Balance 80,000

Debit

Credit

No. 301 Balance 100,000

Ref. P

Debit

Credit

No. 306 Balance 5,000

Ref. P

Debit

Credit

0 0

4,100 1,000

No. 429 Balance 80,000 84,100 85,100

Depreciation Expense—Cottages Date Explanation Ref. Aug. 31 Adjusting J1

Debit 1,500

Credit 0

No. 620 Balance 1,500

Depreciation Expense—Furniture Date Explanation Ref. Aug. 31 Adjusting J1

Debit 600

Credit 0

No. 621 Balance 600

P. Harder, Capital Date Explanation Aug. 31 Balance P. Harder, Drawing Date Explanation Aug. 31 Balance Rent Revenue Date Explanation Aug. 31 Balance 31 Adjusting 31 Adjusting

P

J1 J1

Repair Expense Date Explanation Aug. 31 Balance

Ref. P

Debit

Credit

Supplies Expense Date Explanation Aug. 31 Adjusting

Ref. J1

Debit 2,700

Credit 0

No. 631 Balance 2,700

Interest Expense Date Explanation Aug. 31 Adjusting

Ref. J1

Debit 600

Credit 0

No. 718 Balance 600

Insurance Expense Date Explanation Aug. 31 Adjusting

Ref. J1

Debit 1,200

Credit 0

No. 722 Balance 1,200

Salaries Expense

3 of 5

Ref.

Balance 6,500

No. 622 Balance 3,600

No. 726

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P3-2A. Answer

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Date Aug. 31 31

Explanation Balance Adjusting

Utilities Expense Date Explanation Aug. 31 Balance

Ref. P J1

Ref. P

Debit

Credit

Balance 51,000

400

0

51,400

Debit

Credit

No. 732 Balance 9,400

(c) Prepare an adjusted trial balance on August 31. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.) NEOSHO RIVER RESORT Adjusted Trial Balance August 31, 2010 Debit Cash Accounts Receivable Supplies Prepaid Insurance Land Cottages Accumulated Depreciation—Cottages Furniture

Credit $19,600

$0

1,000

0

600

0

4,800

0

25,000

0

125,000

0

0

1,500

26,000

0

Accumulated Depreciation—Furniture

0

600

Accounts Payable

0

6,500

Unearned Rent

0

3,300

Salaries Payable

0

400

Interest Payable

0

600

Mortgage Payable

0

80,000

0

100,000

P. Harder, Capital P. Harder, Drawing

5,000

0

0

85,100

Depreciation Expense—Cottages

1,500

0

Depreciation Expense—Furniture

600

0

Repair Expense

3,600

0

Supplies Expense

2,700

0

Interest Expense

600

0

1,200

0

Salaries Expense

51,400

0

Utilities Expense

9,400

0

$278,000

$278,000

Rent Revenue

Insurance Expense

(d) Prepare an income statement and an owner’s equity statement for the 3 months ending August 31 and a balance sheet as of August 31. (List multiple entries from largest to smallest eg 10, 5, 3, 2. If amounts are the same, list alphabetically. For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2, with accounts payable listed first.) NEOSHO RIVER RESORT Income Statement For the Three Months Ended August 31, 2010 Revenues Rent revenue Expenses Salaries expense Utilities expense Repair expense

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$85,100 $51,400 9,400 3,600

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Supplies expense Depreciation expense Insurance expense Depreciation expense Interest Expense Total expenses

2,700 1,500 1,200 600 600

cottages furniture

71,000 $14,100

Net income NEOSHO RIVER RESORT Owner's Equity Statement For the Three Months Ended August 31, 2010 P.Harder, Capital, June 1 Investment by owner Add: Net income

$0 100,000 14,100 114,100 5,000 $109,100

Less: Drawings P.Harder, Capital, August 31 NEOSHO RIVER RESORT Balance Sheet August 31, 2010 Assets Cash Accounts receivable Supplies Prepaid insurance Land Cottages Less: Acc. Depr.-cottages Furniture Less: Acc. Depr.-furniture

$19,600 1,000 600 4,800 25,000 $125,000 1,500 26,000 600

Total assets

123,500 25,400 $199,900

Liabilities and Owner's Equity Liabilities Accounts Payable Mortgage payable Unearned rent Interest payable Salaries payable Total liabilities Owner's equity P.Harder, Capital Total liabilities and owner's equity

$6,500 80,000 3,300 600 400 90,800 109,100 $199,900

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