Question

The Highland Cove Resort has a May 31 fiscal year end and prepares adjusting entries on a monthly basis. The following trial balance was prepared before recording the May 31 month-end adjustments:

Prepare and post adjusting entries, and prepare adjusted trial balance and financial statements.

HIGHLAND COVE RESORT Trial Balance May 31, 2021
		Debit		Credit
Cash		$  17,520
Prepaid insurance		1,590
Supplies		995
Land		35,000
Building		150,000
Accumulated depreciation—building				$  47,750
Furniture		33,000
Accumulated depreciation—furniture				12,925
Accounts payable				8,500
Unearned revenue				15,000
Mortgage payable				96,000
K. MacPhail, capital				85,000
K. MacPhail, drawings		42,735
Service revenue				246,150
Depreciation expense		5,775
Insurance expense		5,830
Interest expense		5,720
Repairs expense		14,400
Salaries expense		156,710
Supplies expense		4,450
Utilities expense		37,600
		$511,325		$511,325

Additional information:

1. The company pays $6,360 for its annual insurance policy on July 31 of each year.
2. A count shows $560 of supplies on hand on May 31, 2021.
3. The building has an estimated useful life of 50 years.
4. The furniture has an estimated useful life of 10 years.
5. Services related to two thirds of the unearned revenue have been performed.
6. The mortgage interest rate is 6.5% per year. Interest has been paid to May 1, 2021.
7. Salaries accrued to the end of May were $1,450.
8. The May utility bill of $3,420 is unrecorded and unpaid.

Instructions

Prepare and post the monthly adjusting journal entries on May 31.

Answer 1

	HIGHLAND COVE RESORT
	Trial Balance
		Unadjusted		Adjustment		Adjusted
		Debit	Credit	Debit	Credit	Debit	Credit
	Cash	17,520				17,520
	Prepaid insurance	1,590			530	1,060
	Supplies	995			435	560
	Land	35,000				35,000
	Building	150,000				150,000
	Accumulated depreciation—building		47,750		250		48,000
	Furniture	33,000				33,000
	Accumulated depreciation—furniture		12,925		275		13,200
	Accounts payable		8,500		3,420		11,920
	Unearned revenue		15,000	10,000			5,000
	Interest payable				520		520
	Salaries Payable				1,450		1,450
	Mortgage payable		96,000				96,000
	K. MacPhail, capital		85,000				85,000
	K. MacPhail, drawings	42,735				42,735
	Service revenue		246,150		10,000		256,150
	Depreciation expense	5,775		525		6,300
	Insurance expense	5,830		530		6,360
	Interest expense	5,720		520		6,240
	Repairs expense	14,400				14,400
	Salaries expense	156,710		1,450		158,160
	Supplies expense	4,450		435		4,885
	Utilities expense	37,600		3,420		41,020
	Total	511,325	511,325	16,880	16,880	517,240	517,240
	Account Titles and Explanation	Debit	Credit
1	Insurance expense	530		(6,360/12)
	Prepaid insurance		530
2	Supplies expense	435		(995 - 560)
	Supplies		435
3	Depreciation expense	250		(150,000/50 x 1/12)
	Accumulated depreciation—building		250
4	Depreciation expense	275		(33,000/10 x 1/12)
	Accumulated depreciation—furniture		275
5	Unearned revenue	10,000		(15,000 x 2/3)
	Service revenue		10,000
6	Interest expense	520		(96,000 x 6.5% x 1/12)
	Interest payable		520
7	Salaries expense	1,450
	Salaries Payable		1,450
8	Utilities expense	3,420
	Accounts Payable		3,420