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

a. Prepare T accounts and enter the unadjusted trial balance amounts.

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

c. Prepare an adjusted trial balance at May 31.

d. Prepare an income statement and a statement of owner's equity for the year ended May 31, and a balance sheet as at May 31, 2021.

Answer 1

Highland Cove Resort
Income Statement
For the Year Ended May 31, 2021
Rent Revenue		$     256,150
Less: Expenses
Depreciation Expense	$       6,300
Insurance Expense	$       6,360
Interest Expense	$       6,240
Salaries Expense	$   158,160
Repairs Expense	$     14,400
Supplies Expense	$       4,885
Utilities Expense	$     41,020
Total Expense		$     237,365
Net Income		$       18,785
Highland Cove Resort
Statement of Changes in Equity
For the Year Ended May 31, 2021
K MacPhail Capital		$       85,000
Add: Net Profit		$       18,785
Less: Drawings		$       42,735
K MacPhail Capital		$       61,050
Highland Cove Resort
Statement of Financial Position
31-May-21
Assets
Cash		$       17,520
Prepaid Insurance		$         1,060
Supplies		$            560
Land		$       35,000
Buildings	$   150,000
Accumulated Depreciation - Buildings	$     48,000	$     102,000
Furniture	$     33,000
Accumulated Depreciation - Furnitures	$     13,200	$       19,800
Total Assets		$     175,940
Liabilities & Owners Equity
Accounts Payable	$       8,500
Unearned Revenue	$       5,000
Mortgage Payable	$     96,000
Salaries Payable	$       1,450
Utilities Payable	$       3,420
Interest Payable	$          520
Total Liabilities		$     114,890
Owners Equity
K MacPhail Capital	$     61,050
Total Owners Equity		$       61,050
Total Liabilities & Owners Equity		$     175,940