Please complete the attached practice problems. Use the attached excel template for practice problem number 7.
1) 3. Define accrual accounting and contrast it with cash basis accounting.
2) 4. What four conditions must normally be met for revenue to be recognized under accrual basis
3) 2. Identify and state two generally accepted accounting principles that relate to adjusting the accounts.
4) 8. What accounts does a company debit and credit in a prepaid expense adjusting entry?
5) 10. Explain the differences between depreciation expense and accumulated depreciation.
6) 12. What accounts are debited and credited in an unearned revenue adjusting entry?
7) P4-3A The Julien Hotel opened for business on May 1, 2007. Here is its trial balance
before adjustment on May 31.
May 31, 2007
Cash $ 2,500
Prepaid Insurance 1,800
Accounts Payable $ 4,700
Unearned Rent Revenue 3,300
Mortgage Payable 36,000
Common Stock 60,000
Rent Revenue 9,000
Salaries Expense 3,000
Utilities Expense 800
Advertising Expense 500
1. Insurance expires at the rate of $300 per month.
2. An inventory of supplies shows $1,350 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture.
4. The mortgage interest rate is 9%. (The mortgage was taken out on May 1.)
5. Unearned rent of $1,500 has been earned.
6. Salaries of $750 are accrued and unpaid at May 31.
(a) Journalize the adjusting entries on May 31.
(b) Prepare a ledger using T accounts. Enter the trial balance amounts and post the
(c) Prepare an adjusted trial balance on May 31.
(c) Rent revenue $ 10,500
(d) Prepare an income statement and a retained earnings statement for the month of
May and a classified balance sheet at May 31.
(e) Identify which accounts should be closed on May 31.
The solution explains various accounting questions