P3-2A.

Answer

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Answer P3-2A Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. NEOSHO RIVER RESORT Trial Balance August 31, 2010 Account Number 101 126 130 140 143 149 201 209 275 301 306 429 622 726 732 Cash Supplies Prepaid Insurance Land Cottages Furniture Accounts Payable Unearned Rent Mortgage Payable P. Harder, Capital P. Harder, Drawing Rent Revenue Repair Expense Salaries Expense Utilities Expense Debit $19,600 3,300 6,000 25,000 125,000 26,000 Credit

$6,500 7,400 80,000 100,000 5,000 80,000 3,600 51,000 9,400 $273,900

$273,900

In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation-Cottages, No. 150 Accumulated Depreciation-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, No. 621 Depreciation Expense-Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1. 2. 3. 4. 5. 6. 7. Insurance expires at the rate of $400 per month. A count on August 31 shows $600 of supplies on hand. Annual depreciation is $6,000 on cottages and $2,400 on furniture. Unearned rent of $4,100 was earned prior to August 31. Salaries of $400 were unpaid at August 31. Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.) The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)

Instructions (a) Journalize the adjusting entries on August 31 for the 3-month period June 1August 31. J1 Date Aug. 31 Account/Description Insurance Expense Prepaid Insurance (To record expired insurance) 31 Supplies Expense Supplies (To record supplies used) 31 Depreciation Expense Cottages 1,500 1,500 600 Acc. Depr.-Cottages (To record cottage depreciation) 31 Depreciation Expense Furniture 2700 2700 Debit 1,200 1,200 Credit

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Acc. Depr.-Furniture (To record furniture depreciation) 31 Unearned Rent Rent Revenue (To record rent earned) 31 Salaries Expense Salaries Payable (To record accrued wages) 31 Accounts Receivable Rent Revenue (To record accrued rent) 31 Interest Expense Interest Payable (To record interest expense) 600 1000 400 4100

600

4100

400

1000

600

(b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.) (If an amount should be blank, enter a zero. All boxes must be filled to be correct.) Cash Date Aug. 31 No. 101 Balance 19600 No. 112 Balance 1,000 No. 126 Balance 3,300 600 No. 130 Balance 6,000 4,800 No. 140 Balance 25,000 No. 143 Balance 125,000 No. 144 Balance 1,500 No. 149 Balance 26,000 No. 150 Balance 600 No. 201

Explanation Balance

Ref. P

Debit

Credit

Accounts Receivable Date Explanation Aug. 31 Adjusting Supplies Date Aug. 31 31

Ref. J1

Debit 1000

Credit 0

Explanation Balance Adjusting

Ref. P J1

Debit 0

Credit 2,700

Prepaid Insurance Date Explanation Aug. 31 Balance 31 Adjusting Land Date Aug. 31 Cottages Date Aug. 31

Ref. P J1

Debit 0

Credit 1,200

Explanation Balance

Ref. P

Debit

Credit

Explanation Balance

Ref. P

Debit

Credit

Accumulated DepreciationCottages Date Explanation Ref. Aug. 31 Adjusting J1 Furniture Date Explanation Aug. 31 Balance

Debit 0

Credit 1,500

Ref. P

Debit

Credit

Accumulated DepreciationFurniture Date Explanation Ref. Aug. 31 Adjusting J1 Accounts Payable

Debit 0

Credit 600

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Date Aug. 31 Unearned Date Aug. 31 31

Explanation Balance Rent Explanation Balance Adjusting

Ref. P

Debit

Credit

Balance 6,500 No. 208 Balance 7,400 3,300 No. 212 Balance 400 No. 230 Balance 600 No. 275 Balance 80,000 No. 301 Balance 100,000 No. 306 Balance 5,000 No. 429 Balance 80,000 84,100 85,100 No. 620 Balance 1,500 No. 621 Balance 600 No. 622 Balance 3,600 No. 631 Balance 2,700 No. 718 Balance 600 No. 722 Balance 1,200 No. 726

Ref. P J1

Debit 4,100

Credit 0

Salaries Payable Date Explanation Aug. 31 Adjusting Interest Payable Date Explanation Aug. 31 Adjusting Mortgage Payable Date Explanation Aug. 31 Balance P. Harder, Capital Date Explanation Aug. 31 Balance P. Harder, Drawing Date Explanation Aug. 31 Balance Rent Revenue Date Explanation Aug. 31 Balance 31 Adjusting 31 Adjusting

Ref. J1

Debit 0

Credit 400

Ref. J1

Debit 0

Credit 600

Ref. P

Debit

Credit

Ref. P

Debit

Credit

Ref. P

Debit

Credit

Ref. P J1 J1

Debit 0 0

Credit 4,100 1,000

Depreciation ExpenseCottages Date Explanation Ref. Aug. 31 Adjusting J1 Depreciation ExpenseFurniture Date Explanation Ref. Aug. 31 Adjusting J1 Repair Expense Date Explanation Aug. 31 Balance Supplies Expense Date Explanation Aug. 31 Adjusting Interest Expense Date Explanation Aug. 31 Adjusting Insurance Expense Date Explanation Aug. 31 Adjusting Salaries Expense

Debit 1,500

Credit 0

Debit 600

Credit 0

Ref. P

Debit

Credit

Ref. J1

Debit 2,700

Credit 0

Ref. J1

Debit 600

Credit 0

Ref. J1

Debit 1,200

Credit 0

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Date Aug. 31 31

Explanation Balance Adjusting

Ref. P J1

Debit 400

Credit 0

Balance 51,000 51,400 No. 732 Balance 9,400

Utilities Expense Date Explanation Aug. 31 Balance

Ref. P

Debit

Credit

(c) Prepare an adjusted trial balance on August 31. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.) NEOSHO RIVER RESORT Adjusted Trial Balance August 31, 2010 Debit Cash Accounts Receivable Supplies Prepaid Insurance Land Cottages Accumulated DepreciationCottages Furniture Accumulated DepreciationFurniture Accounts Payable Unearned Rent Salaries Payable Interest Payable Mortgage Payable P. Harder, Capital P. Harder, Drawing Rent Revenue Depreciation ExpenseCottages Depreciation ExpenseFurniture Repair Expense Supplies Expense Interest Expense Insurance Expense Salaries Expense Utilities Expense $19,600 1,000 600 4,800 25,000 125,000 0 26,000 0 0 0 0 0 0 0 5,000 0 1,500 600 3,600 2,700 600 1,200 51,400 9,400 $278,000 Credit $0 0 0 0 0 0 1,500 0 600 6,500 3,300 400 600 80,000 100,000 0 85,100 0 0 0 0 0 0 0 0 $278,000

(d) Prepare an income statement and an owners equity statement for the 3 months ending August 31 and a balance sheet as of August 31. (List multiple entries from largest to smallest eg 10, 5, 3, 2. If amounts are the same, list alphabetically. For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2, with accounts payable listed first.) NEOSHO RIVER RESORT Income Statement For the Three Months Ended August 31, 2010 Revenues Rent revenue Expenses Salaries expense Utilities expense Repair expense $85,100 $51,400 9,400 3,600

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Supplies expense Depreciation expense Insurance expense Depreciation expense Interest Expense Total expenses Net income

cottages furniture

2,700 1,500 1,200 600 600 71,000 $14,100

NEOSHO RIVER RESORT Owner's Equity Statement For the Three Months Ended August 31, 2010 P.Harder, Capital, June 1 Investment by owner Add: Net income Less: Drawings P.Harder, Capital, August 31 NEOSHO RIVER RESORT Balance Sheet August 31, 2010 Assets Cash Accounts receivable Supplies Prepaid insurance Land Cottages Less: Acc. Depr.-cottages Furniture Less: Acc. Depr.-furniture Total assets Liabilities and Owner's Equity Liabilities Accounts Payable Mortgage payable Unearned rent Interest payable Salaries payable Total liabilities Owner's equity P.Harder, Capital Total liabilities and owner's equity $6,500 80,000 3,300 600 400 90,800 109,100 $199,900 $19,600 1,000 600 4,800 25,000 $125,000 1,500 26,000 600 123,500 25,400 $199,900 $0 100,000 14,100 114,100 5,000 $109,100

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