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Please help with this accounting question?

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Please help with this accounting question?

Postby galloway » Fri May 11, 2012 4:43 pm

The Olathe Hotel opened for business on May 1, 2010. Here is its trial balance before adjustment on May 31.


OLATHE HOTEL
Trial Balance
May 31, 2010

Debit Credit
Cash $2,500
Prepaid Insurance 1,800
Supplies 2,600
Land 15,000
Lodge 70,000
Furniture 16,800
Accounts Payable $4,700
Unearned Rent Revenue 3,300
Mortgage Payable 36,000
Common Stock 60,000
Rent Revenue 9,000
Salaries Expense 3,000
Utilities Expense 800
Advertising Expense 500



The Totals for both credit and debit equals $113,000




Other data:
1. Insurance expires at the rate of $300 per month.
2. A count of supplies shows $1,050 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture.
4. The mortgage interest rate is 7%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2,500 has been earned.
6. Salaries of $750 are accrued and unpaid at May 31.
galloway
 
Posts: 853
Joined: Mon Mar 21, 2011 2:18 pm

Please help with this accounting question?

Postby holden » Fri May 11, 2012 4:47 pm

1. Insurance expires at the rate of $300 per month.
Dr Insurance Expense 300
Cr Prepaid Insurance 300
2. A count of supplies shows $1,050 of unused supplies on May 31.
2,600 - 1,050 = 1,550 adjustment
Dr Supplies Expense 1,550
Cr Supplies 1,550
3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture.
3,600 / 12 = $300 adjustment
3,000 / 12 = $250 adjustment
Dr Depreciation Expense--Lodge 300
Cr Accumulated Depreciation--Lodge 300

Dr Depreciation Expense--Furniture 250
Cr Accumulated Depreciation--Furniture 250
4. The mortgage interest rate is 7%. (The mortgage was taken out on May 1.)
36,000 x 7% x 1/12 = 210 interest expense
Dr Interest Expense 210
Cr Interest Payable 210
5. Unearned rent of $2,500 has been earned.
Dr Unearned Rent 2,500
Cr Rent Revenue 2,500
6. Salaries of $750 are accrued and unpaid at May 31.
Dr Salaries Expense 750
Cr Salaries Payable 750

Include the new accounts for your adjusted trial balance. Then add or subtract each of the adjustments.
holden
 
Posts: 882
Joined: Mon Mar 21, 2011 10:41 am


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