Question

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

GRECO RESORT TRIAL BALANCE AUGUST 31, 2017
Contents	Debit	Credit
Cash	$ 19, 600
Prepaid Insurance	4500
Supplies	2600
Land	20,000
Buildings	1,20,000
Equipment’s	16, 000
Accounts Payable		$ 4,500
Unearned Rent Revenue		4,600
Mortgage Payable		60, 000
Common Stock		91,000
Retained Earnings		9,000
Dividends	5,000
Rent Revenue		76,200
Salaries and Wages Expense	44,800
Utilities Expenses	9,200
Maintenance and Repairs Expense	3,600
Total	$245,300	$245,300

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 $450 of supplies on hand.

3. Annual depreciation rates are buildings (4%) and equipment (10%). Salvage value is estimated to be 10% of cost.

4. Unearned Rent Revenue of $3,800 was earned prior to August 31.

5. Salaries of $375 were unpaid at August 31.

6. Rentals of $800 were due from tenants at August 31.

7. The mortgage interest rate is 8% per year.

Instructions:

(a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. (Omit explanations.)

(b) Prepare an adjusted trial balance on August 31.

Answer 1

a)

Date	General Journal	Debit	Credit
Aug-31	Insurance expenses ($4,500/12*3)	$   1,125
	Prepaid insurance		$   1,125
Aug-31	Supplies expenses ($2,600-450)	$   2,150
	Supplies		$   2,150
Aug-31	Depreciation expenses - Building ($120,000-12,000)*4%*3/12)	$   1,080
	Accumulated depreciation - Building		$   1,080
Aug-31	Depreciation expenses - Equipment ($16,000-1,600)*10%*3/12)	$      360
	Accumulated depreciation - Equipment		$      360
Aug-31	Unearned rent revenue	$   3,800
	Rent revenue		$   3,800
Dec-31	Salaries expense	$      375
	Salaries payable		$      375
Dec-31	Accounts receivable	$      800
	Rent revenue		$      800
Dec-31	Interest expenses ($60,000*8%*3/12)	$   1,200
	Interest payable		$   1,200

b)

GRECO RESORT
Adjusted Trial Balance
AUGUST 31, 2017
Accounts	Debit	Credit
Cash	$     19,600
Accounts receivable	$           800
Prepaid insurance (4,500-1,125)	$       3,375
Supplies	$           450
Land	$     20,000
Building	$   120,000
Equipment	$     16,000
Accumulated depreciation - Building		$       1,080
Accumulated depreciation - Equipment		$           360
Accounts payable		$       4,500
Unearned rent revenue ($4,600-3,800)		$           800
Mortgage payable		$     60,000
Interest payable		$       1,200
Salaries payable		$           375
Common Stock		$     91,000
Retained earnings		$       9,000
Dividends	$       5,000
Rent revenue ($76,200+3,800+800)		$     80,800
Salaries and wages expense ($44,800+375)	$     45,175
Utilities expenses	$       9,200
Supplies expense	$       2,150
Maintenance and Repairs Expense	$       3,600
Depreciation expense - Building	$       1,080
Depreciation expense - Equipment	$           360
Interest expense	$       1,200
Insurance expense	$       1,125
Total	$   249,115	$   249,115

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