Question

Problem 3-02A a-d Sunland's Hotel opened for business on May 1, 2020. Its trial balance before adjustment on May 31 is as follows. SUNLAND'S HOTEL Trial Balance May 31, 2020 Debit Credit Account Number 101 126 $ 3,600 2,050 130 140 1,800 14,000 61,800 15,600 141 149 201 Cash Supplies Prepaid Insurance Land Buildings Equipment Accounts Payable Unearned Rent Revenue Mortgage Payable Owner's Capital Rent Revenue Advertising Expense Salaries and Wages Expense Utilities Expense 208 275 $ 4,900 3,000 40,000 41,200 14,650 301 429 650 610 726 3,400 850 732 $103,750 $103,750 In addition to those accounts listed on the trial balance, the chart of accounts for Sunland's Hotel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation-Buildings, No. 150 Accumulated Depreciation -Equipment, 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, 2020. 2. A count of supplies shows $800 of unused supplies on May 31. 3. Annual depreciation is $3,708 on the buildings and $1,560 on equipment. 4. The mortgage at an annual interest rate is 6%. (The mortgage was taken out on May 1.) 5. Two-thirds of the unearned rent revenue has been earned. 6. Salaries of $700 are accrued and unpaid at May 31.

Answer 1

Adjusting Entries on May 31st

No	Date	Account title and explanation	Debit	Credit
1	May 31	Insurance Expense	150
		Prepaid Insurance [1,800/12] X 1		150
		[Prepaid insurance has been exhausted for 1 month ]
2	May 31	Supplies Expense	1,250
		Supplies [ 2,050 - 800]		1,250
		[Supplies used during the period ]
3	May 31	Depreciation Expense	5,268
		Accumulated depreciation - Building		3,708
		Accumulated depreciation - Equipment		1,560
		[Depreciation on building and equipments charged ]
4	May 31	Interest Expense	200
		Interest Payable [40,000 X 6% X 1/12]		200
		[Adjustment entry made for interest expense ]
5	May 31	Unearned rent revenue	2,000
		Rent Revenue ( 3,000 X 2/3)		2,000
		[Unearned rent revenue, earned during the period ]
6	May 31	Salaries and wages expense	700
		Salaries and wages payable		700
		[Adjustment entry made for Salaries expense due but not paid ]

Cash - 101

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	3,600		3,600

Supplies - 126

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	2,050		2,050
May 31	Adjusting	J1		1,250	800

Prepaid Insurance - 130

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	1,800		1,800
May 31	Adjusting	J1		150	1,650

Land - 140

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	14,000		14,000

Building - 141

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	61,800		61,800

Accumulated depreciation Building - 142

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1		3,708	3,708

Equipment - 149

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	15,600		15,600

Accumulated depreciation Equipment - 150

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1		1,560	1,560

Accounts Payable - 201

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√		4,900	4,900

Unearned rent revenue - 208

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√		3,000	3,000
May 31	Adjusting	J1	2,000		1,000

Salaries and wages payable - 212

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1		700	700

Interest Payable - 230

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1		200	200

Mortgage Payable - 275

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√		40,000	40,000

Owner's Capital - 301

Date	Ecplanation	Ref	Debit	Credit	Balance
May 31	Balance	√		41,200	41,200

Rent Revenue - 429

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√		14,650	14,650
May 31	Adjusting	J1		2,000	16,650

Advertising Expense - 610

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	650		650

Depreciation Expense - 619

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1	5,268		5,268

Supplies Expense - 631

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1	1,250		1,250

Interest Expense - 718

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1	200		200

Insurance Expense - 722

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Adjusting	J1	150		150

Salaries and wages expense  - 726

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	3,400		3,400
May 31	Adjusting	J1	700		4,100

Utilities Expense - 732

Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance	√	850		850

SUNLAND HOTEL

Adjusted Trial Balance

May 31

	Debit	Credit
Cash	3,600
Supplies	800
Prepaid Insurance	1,650
Land	14,000
Building	61,800
Accumulated depreciation Building		3,708
Equipment	15,600
Accumulated depreciation Equipment		1,560
Accounts Payable		4,900
Unearned Rent Revenue		1,000
Salaries and wages payable		700
Interest Payable		200
Mortgage Payable		40,000
Owner's capital		41,200
Rent Revenue		16,650
Advertising Expense	650
Depreciation Expense	5,268
Supplies Expense	1,250
Interest Expense	200
Insurance Expense	150
Salaries and wages expense	4,100
Utilities Expense	850
Total =	109,918	109,918

SUNLAND's HOTEL

Income Statement

For the year ended 31st May

Revenue :
Rent Revenue		16,650
Expenses :
Advertising Expense	650
Depreciation Expense	5,268
Supplies Expense	1,250
Interest Expense	200
Insurance Expense	150
Salaries and wages expense	4,100
Utilities Expense	850
Less:Total Expenses		12,468
Net Income		4,182

SUNLAND's HOTEL

Owner's Equity Statement

May 31

Owner's Capital on 1st May	41,200
Add:
Net Income	4,182
Owner's Capital on 31st May	45,382

SUNLAND 's HOTEL

BALANCE SHEET

AS AT MAY 31

Assets :
Cash		3,600
Supplies		800
Prepaid Insurance		1,650
Land		14,000
Building	61,800
Accumulated depreciation Building	(3,708)	58,092
Equipment	15,600
Accumulated depreciation Equipment	(1,560)	14,040
Total Assets		92,182
Liabilities and owner's Equity :
Liabilities :
Accounts Payable		4,900
Unearned rent revenue		1,000
Salaries and wages payable		700
Interest Payable		200
Mortgage Payable		40,000
Total liabilities		46,800
Owner's Equity :
Owner's Capital balance on May 31		45,382
Total liabilities and owner's Equity		92,182

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