ACC 221 CHAPTER 4 HOMEWORK PROBLEM Sun Valley Resort opened for business on June
ID: 2392496 • Letter: A
Question
ACC 221 CHAPTER 4 HOMEWORK PROBLEM
Sun Valley Resort opened for business on June 1 with eight air-conditioned units. After being in operation for one quarter, Sun Valley is putting together its financial statements. Its trial balance before adjustment on August 31 is presented here.
Sun Valley Resort
Trial Balance
As of August 31, 2017
Debit
Credit
Cash
$24,600
Prepaid Insurance
5,400
Supplies
4,300
Land
40,000
Buildings
132,000
Equipment
36,000
Accounts Payable
$6,500
Unearned Rent Revenue
6,800
Mortgage Payable
120,000
Common Stock
100,000
Dividends
5,000
Rent Revenue
80,000
Salaries and Wages Expense
53,000
Utilities Expense
9,400
Maintenance and Repairs Expense
3,600
Totals
$313,300
$313,300
Other data:
On June 1, the company purchased a 12-month insurance policy.
A count of supplies on August 31 shows $700 of supplies on hand.
Unearned rent of $5,000 was earned prior to August 31.
Salaries of $600 were unpaid at August 31.
Rentals of $1,600 were due from tenants at August 31.
The 15-year mortgage was taken out on June 1, payable annually with an interest rate of 9% per year.
Instructions:
Prepare the adjusting entries on August 31 for the 3-month period June 1 through August 31.
Prepare a ledger using T accounts. Enter the trial balance amounts and post the adjusting entries.
Prepare an income statement, statement of retained earnings and classified balance sheet for the end of the quarter, August 31.
Prepare closing entries for the appropriate accounts so the company is ready to begin the next quarter.
Sun Valley Resort
Trial Balance
As of August 31, 2017
Debit
Credit
Cash
$24,600
Prepaid Insurance
5,400
Supplies
4,300
Land
40,000
Buildings
132,000
Equipment
36,000
Accounts Payable
$6,500
Unearned Rent Revenue
6,800
Mortgage Payable
120,000
Common Stock
100,000
Dividends
5,000
Rent Revenue
80,000
Salaries and Wages Expense
53,000
Utilities Expense
9,400
Maintenance and Repairs Expense
3,600
Totals
$313,300
$313,300
Explanation / Answer
Adjusting Journal Entries
Transaction
Account Title
Debit
Credit
31-Aug
Insurance Expenses
$ 1,350.00
Prepaid Insurance
$ 1,350.00
(Insurance for 3 Months Expired)
31-Aug
Supplies Expense
$ 3,600.00
Supplies
$ 3,600.00
(supplies Consumed)
31-Aug
Unearned Rent Revenue
$ 5,000.00
Rent Revenue
$ 5,000.00
(Revenue Earned)
31-Aug
Salaries and wages Expense
$ 600.00
Salaries Payable
$ 600.00
(salaries payable at the end of August)
31-Aug
Accounts Receivable
$ 1,600.00
Rent Revenue
$ 1,600.00
(rent Receivable)
31-Aug
Interest Expense
$ 2,700.00
Interest Payable
$ 2,700.00
(Interest Payable on Mortgage)
$ 14,850.00
$ 14,850.00
Prepaid Insurance
1-Jun
Opening Balance
5400
31-Aug
Insurance expense
$ 1,350.00
Closing balance
$ 4,050.00
$ 5,400.00
$ 5,400.00
Supplies
1-Jun
Opening Balance
4300
31-Aug
Supplies Expenses
$ 3,600.00
31-Aug
Closing balance
$ 700.00
$ 4,300.00
$ 4,300.00
Unearned Rent Revenue
Rent Revenue
$ 5,000.00
1-Jun
Opening Balance
$ 6,800.00
31-Aug
Closing balance
$ 1,800.00
$ 6,800.00
$ 6,800.00
Rent Revenue
31-Aug
Closing balance
$ 86,600.00
1-Jun
Opening Balance
$ 80,000.00
31-Aug
Unearned Rent Revenue
$ 5,000.00
31-Aug
Accounts Receivable
$ 1,600.00
$ 86,600.00
$ 86,600.00
Salaries and wages Expense
1-Jun
Opening Balance
$ 53,000.00
31-Aug
Closing balance
$ 53,600.00
31-Aug
Salaries Payable
$ 600.00
$ 53,600.00
$ 53,600.00
Sun Valley Resort
Income Statement
as on 31st August
Rent Revenue
$ 86,600.00
Expenses
Supplies Expenses
$ 3,600.00
Salaries and Wages Expenses
$ 53,600.00
Insurance Expenses
$ 1,350.00
Utilities Expenses
$ 9,400.00
Maintenance and Repair Expenses
$ 3,600.00
Interest Expense
$ 2,700.00
Total Expenses
$ 74,250.00
Net Income
$ 12,350.00
Sun Valley Resort
Balance Sheet
As at 31st August
Assets
Current Assets
Cash
$ 24,600.00
Accounts Receivables
$ 1,600.00
Supplies
$ 700.00
Prepaid Insurance
$ 4,050.00
Total Current assets
$ 30,950.00
Equipment
$ 36,000.00
Building
$ 132,000.00
Land
$ 40,000.00
Total assets
$ 238,950.00
Liabilities and Shareholder's Fund
Liabilities
Current Liabilities
Accounts Payable
$ 6,500.00
Unearned rent revenue
$ 1,800.00
Salaries Payable
$ 600.00
Interest Payable
$ 2,700.00
Total Current Liabilities
$ 11,000.00
Long term Liabilities
$ 120,000.00
Shareholder's Fund
Common Stock
$ 100,000.00
Retained Earning
$ 7,350.00
Total Liabilities and Shareholder's Fund
$ 238,350.00
Statement of Retained Earning
Beginning Balance
$ -
Profits During the Year
$ 12,350.00
Less: Drawings during the year
$ 5,000.00
Closing balance of Retained Earnings
$ 7,350.00
Adjusting Journal Entries
Transaction
Account Title
Debit
Credit
31-Aug
Insurance Expenses
$ 1,350.00
Prepaid Insurance
$ 1,350.00
(Insurance for 3 Months Expired)
31-Aug
Supplies Expense
$ 3,600.00
Supplies
$ 3,600.00
(supplies Consumed)
31-Aug
Unearned Rent Revenue
$ 5,000.00
Rent Revenue
$ 5,000.00
(Revenue Earned)
31-Aug
Salaries and wages Expense
$ 600.00
Salaries Payable
$ 600.00
(salaries payable at the end of August)
31-Aug
Accounts Receivable
$ 1,600.00
Rent Revenue
$ 1,600.00
(rent Receivable)
31-Aug
Interest Expense
$ 2,700.00
Interest Payable
$ 2,700.00
(Interest Payable on Mortgage)
$ 14,850.00
$ 14,850.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.