Question

GRECO RESORT
TRIAL BALANCE
AUGUST 31, 2017
Debit Credit
Cash $19,600
Prepaid Insurance 4,500
Supplies 2,600
Land 20,000
Buildings 120,000
Equipment 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
$ 245,300 $245,300
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

Answer:

GRECO RESORT

a) Journal Entries on August 31:

1. Debit Insurance Expense $1,125

Credit Prepaid Insurance $1,125

2. Debit Supplies Expense $2,150

Credit Supplies $2,150

3. Debit Depreciation Expense-Buildings $4,800

Credit Accumulated Depreciation - Buildings $4,800

Debit Depreciation Expense- Equipment $1,440

Credit Accumulated Depreciation- Equipment $1,440

4. Debit Unearned Rent Revenue $3,800

Credit Rent Revenue $3,800

5. Debit Salaries Expense $375

Credit Salaries Expense Payable $375

6. Debit Accounts Receivable $800

Credit Rent Revenue $800

7. Debit Mortgage Interest Expense $1,200

Credit Mortgage Interest Payable $1,200

b. GRECO RESORT

Adjusted TRIAL BALANCE

AUGUST 31, 2017

                                                          Debit             Credit

Cash                                                $19,600

Accounts Receivable                            800

Prepaid Insurance                              3,375

Supplies                                                450

Land                                                 20,000

Buildings                                         120,000

Equipment                                        16,000

Accounts Payable                                             $4,500

Mortgage Interest Payable                                 1,200

Unearned Rent Revenue                                      800

Mortgage Payable                                           60,000

Common Stock                                                91,000

Retained Earnings                                            9,000

Accumulated Depreciation-Buildings              4,800

Accumulated Depreciation-Equipment            1,440

Dividends                                           5,000

Rent Revenue                                                80,800

Salaries & Wages Expense Payable                  375

Salaries and Wages Expense          45,175

Utilities Expenses                             9,200

Maintenance & Repairs Expense     3,600

Insurance Expense                            1,125

Supplies Expense                             2,150

Depreciation Expense- Buildings    4,800

Depreciation Expense- Equipment  1,440

Mortgage Interest Expense             1,200

Total                                          $ 253,915  $253,915

Explanation:

a) Data and Calculations:

GRECO RESORT

TRIAL BALANCE

AUGUST 31, 2017

                                                        Debit             Credit

Cash                                              $19,600

Prepaid Insurance                           4,500

Supplies                                            2,600

Land                                               20,000

Buildings                                       120,000

Equipment                                      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 & Repairs Expense  3,600

Total                                       $ 245,300  $245,300

b) Mortgage Interest Expense = $60,000 * 8% * 3/12 = $1,200