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Accounting Cycle - Thayer Motel

See attached problem.

The Thayer Motel, Inc. opened for business on May 1, 2006. Its trial balance before adjustment on May 31 is as follows.

Thayer Motel, Inc.
Trial Balance
May 31, 2006

Account Number Debit Credit

101 Cash $2500
126 Supplies 1900
130 Prepaid Insurance 2400
140 Land 15,000
141 Lodge 70,000
149 Furniture 16,800
201 Accounts Payable $5,300
208 Unearned Rent 4,600
275 Mortgage Payable 35,000
311 Common Stock 60,000
332 Dividends 1,000
429 Rent Revenue 9200
610 Advertising Expenses 500
726 Salaries Expenses 3,000
732 Utilities Expenses 1,000

$114,100 $114,100

In addition to those accounts listed on the trial balance, the chart of accounts for Thayer Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation - Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 320 Retained Earnings, No. 619 Depreciation Expense - Lodge, No. 621 Depreciation Expense - Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.

Other data:

1. Insurance expires at the rate of $200 a month.
2. A count of supplies shows $900 of unused supplies on May 31.
3. Annual depreciation is $2400 on the lodge and $3000 on furniture.
4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2500 has been earned.
6. Salaries are $800 accrued and unpaid at May 31.

Instructions:

a. Journalize the adjusting entries on May 31.
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.)
c. Prepare an adjusted trial balance on May 31.
(c) adjusted trial balance $115, 700
d. Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31.
(d) Net income $4,400.
Ending retained earnings balance $3400.
Total Assets $106,950.

Attachments

Solution Preview

Please see the attached file

(a) Journal Entries J1
Date Account Titles and Explanation Ref Debit Credit
May 31 Insurance Expense 722 200
Prepaid Insurance 130 200

May 31 Supplies Expense 631 1,000
Supplies (1,900-900) 126 1,000

May 31 Depreciation Expense - Lodge 619 200
(2,400 X 1/12)
Accumulated Depreciation - Lodge 142 200

May 31 Depreciation Expense - Furniture 621 250
(3,000 X 1/12)
Accumulated Depreciation - Furniture 150 250

May 31 Interest Expense 718 350
Interest Payable 230 350
(35,000 X 12%) X 1/12

May 31 Unearned Rent 208 2,500
Rent Revenue 429 2,500

May 31 Salaries Expense 726 800
Salaries Payable 212 800

(b)

Cash No. 101
Date Explanation Ref Debit Credit Balance
May 31 Balance 2,500

Supplies No. 126
Date Explanation Ref Debit Credit Balance
May 31 Balance 1,900
May 31 Adjusting J1 1,000 900

Prepaid Insurance No. 130
Date Explanation Ref Debit Credit Balance
May 31 Balance 2,400
May 31 Adjusting J1 200 2,200

Land No. 140
Date Explanation Ref Debit Credit Balance
May 31 Balance 15,000

Lodge No. 141
Date Explanation Ref Debit Credit Balance
May 31 Balance 70,000

Accumulated Depreciation - Lodge No. 142
Date Explanation Ref Debit Credit Balance ...

Solution Summary

The solution has the total accounting cycle for Thayer Motel. Preapre journal entries, post to ledger, trial balance, adjusted trial balance and financial statements

$2.19