Question

Wildhorse Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows. WILDHORSE RESORT TRIAL BALANCE AUGUST 31, 2017 Debit Credit Cash $25,000 Prepaid Insurance 9,900 Supplies 8,000 Land 26,000 Buildings 126,000 Equipment 22,000 Accounts Payable $9,900 Unearned Rent Revenue 10,000 Mortgage Payable 66,000 Common Stock 102,400 Retained Earnings 9,000 Dividends 5,000 Rent Revenue 82,200 Salaries and Wages Expense 44,800 Utilities Expenses 9,200 Maintenance and Repairs Expense 3,600 Totals $279,500 $279,500 Other data: 1. The balance in prepaid insurance is a one-year premium paid on June 1, 2017. 2. An inventory count on August 31 shows $431 of supplies on hand. 3. Annual depreciation rates are (a) buildings (4%) (b) equipment (10%). Salvage value is estimated to be 10% of cost. 4. Unearned Rent Revenue of $4,152 was earned prior to August 31. 5. Salaries of $410 were unpaid at August 31. 6. Rentals of $791 were due from tenants at August 31. (Use Accounts Receivable account.) 7. The mortgage interest rate is 8% per year.

Answer 1

Date	Account title	Debit	credit
August 31,2017
1	Insurance expense	2475
	Prepaid Insurance		2475
	[Being insurance expired for 3 months(1June -31Aug) :9900*3/12]
2	Supplies expense	7569
	Supplies		7569
	[Being supplies used :8000-431]
3	Depreciation expense-Building	4536
	Depreciation expense-Equipment	1980
	Accumulated depreciation -Building		4536
	Accumulated depreciation-equipment		1980
4	Unearned rent revenue	4152
	Rent revenue		4152
5	Salaries expense	410
	Salaries payable		410
6	Accounts receivable	791
	Rent revenue		791
7	Interest expense	1320
	Interest payable		1320
	[Being interest accrued for 3months :66000*.10*3/12]

**

Salvage value of Building = Cost*salvage value

                       = 126000*10%

                       = 12600

Salvage of Equipment = 22000*10%

                          = 2200

Depreciation on Building =[cost- Salvage value] *Depreciation rate

                      = [126000-12600] *4%

                       =113400*4%

                      = 4536

Depreciation on equipment =[22000-2200]*10%

                            = 1980