Question

Pina Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows.

PINA RESORT TRIAL BALANCE AUGUST 31, 2017
		Debit			Credit
Cash		$26,800
Prepaid Insurance		11,700
Supplies		9,800
Land		28,000
Buildings		128,000
Equipment		24,000
Accounts Payable					$11,700
Unearned Rent Revenue					11,800
Mortgage Payable					68,000
Common Stock					106,200
Retained Earnings					9,000
Dividends		5,000
Rent Revenue					84,200
Salaries and Wages Expense		44,800
Utilities Expenses		9,200
Maintenance and Repairs Expense		3,600
Totals		$290,900			$290,900

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 $444 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 $3,664 was earned prior to August 31.
5.		Salaries of $340 were unpaid at August 31.
6.		Rentals of $746 were due from tenants at August 31. (Use Accounts Receivable account.)
7.		The mortgage interest rate is 8% per year.

PART 1

Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. (Round answers to the nearest whole dollar, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

PART 2

Prepare an adjusted trial balance on August 31.

Answer 1

Part 1

Transaction	Adjustment Entries	Dr. ($)	Cr. ($)
1	insurance expenses ((11500*3)/12)	2925
	To prepaid insurance		2925
	(being insurance expense expired)
2	supplies expenses (9800-444)	9356
	To supplies		9356
	(being supplies expenses recorded)
3a	depreciation expenses – building	1152
	To accumulated depreciation expenses – building		1152
	(being depreciation expenses recorded)
3b	depreciation expenses – equipment	540
	To accumulated depreciation expenses – equipment		540
	(being depreciation expenses recorded)
4	unearned rent revenue	3664
	To rent revenue		3664
	(being rent revenue earned recorded)
5	salaries and wages expenses	340
	To salaries and wages payable		340
	(being salaries and wages payable recorded)
6	accounts receivable	746
	To rent revenue		746
	(being rent revenue accrued recorded)
7	interest expenses ((68000*8%*3)/12)	1360
	To interest payable		1360
	(being interest expense due recorded)

Part 2

accounts	Dr. ($)	Cr. ($)
cash	26800
accounts receivable	746
prepaid insurance	8775
supplies	444
land	28000
buildings	128000
accumulated depreciation – buildings		1152
equipment	24000
accumulated depreciation – equipment		540
accounts payable		11700
unearned rent revenue		8136
salaries and wages payable		340
interest payable		1360
mortgage payable		68000
common stock		106200
retained earnings		9000
dividend	5000
rent revenue		88610
salaries and wages expenses	45140
supplies expenses	9356
utilities expenses	9200
maintenance and repairs expenses	3600
insurance expenses	2925
interest expenses	1360
depreciation expenses – building	1152
depreciation expenses – equipment	540
totals	295038	295038

calculation of depreciation

	building	equipment
original cost	128000	24000
Salvage %	10.00%	10.00%
salvage value	12800	2400
remaining value	115200	21600
depreciation rate	4.00%	10.00%
annual depreciation	4608	2160
3 months depreciation	1152	540