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Econ 3A Section Week 5 Problem KEY

a. Journalize the adjusting entries on May 31.


Account Debit Credit
1) Insurance Expense 300
Prepaid Insurance 300
2) Supplies Expense (2600-1350) 1250
Supplies 1250
3) Depreciation Expense (3600/12) 300
Accumulated Depreciation - Lodge 300
Depreciation Expense (3000/12) 250
Accumulated Depreciation - Furniture 250
4) Interest Expense (36000*9%/12) 270
Interest Payable 270
5) Unearned Rent Revenue 1500
Rent Revenue 1500
6) Salaries Expense 750
Salaries Payable 750

b. Prepare an adjusted trial balance on May 31.


JULIEN HOTEL
Adjusted Trial Balance
May 31, 2007
Account Debit Credit
Cash $ 2,500
Prepaid Insurance 1,500
Supplies 1,350
Land 15,000
Lodge 70,000
Accumulated Depreciation - Lodge $ 300
Furniture 16,800
Accumulated Depreciation - Furniture 250
Accounts Payable 4,700
Interest Payable 270
Salaries Payable 750
Unearned Rent Revenue 1,800
Mortgage Payable 36,000
Common Stock 60,000
Rent Revenue 10,500
Salaries Expense 3,750
Utilities Expense 800
Advertising Expense 500
Insurance Expense 300
Supplies Expense 1,250
Depreciation Expense 550
Interest Expense 270
$ 114,570 $ 114,570
c. Prepare an income statement and a retained earnings statement for the month of May and a
classified balance sheet at May 31.

JULIEN HOTEL
Income Statement
For the month ended May 31, 2007

Revenue
Rent Revenue $ 10,500
Expenses
Salaries Expense 3,750
Utilities Expense 800
Advertising Expense 500
Insurance Expense 300
Supplies Expense 1,250
Depreciation Expense 550
Interest Expense 270
Total Operating
Expenses 7,420
Net Income $ 3,080
JULIEN HOTEL
Balance Sheet
As of May 31, 2007
Assets
Current Assets
Cash $ 2,500
Prepaid Insurance 1,500
Supplies 1,350
Total Current Assets 5,350
Land 15,000
Lodge 70,000
Less: Accumulated Depreciation - Lodge 300 69,700
Furniture 16,800
Less: Accumulated Depreciation - Furniture 250 16,550
Total Assets $ 106,600
Liabilities and Equity
Liabilities
Current Liabilities
Accounts Payable $ 4,700
Interest Payable 270
Salaries Payable 750
Unearned Rent Revenue 1,800
Current Portion of Mortgage Payable 6,000
Total Current Liabilities 13,520
Mortgage Payable 30,000
Total Liabilities 43,520
Equity
Common Stock 60,000
Retained Earnings 3,080 63,080
Total Liabilities and Equity $ 106,600

d. Identify which accounts should be closed on May 31.

All the revenue and expense accounts should be closed on May 31.

Account Debit Credit

Rent Revenue 10,500


Salaries Expense 3,750
Utilities Expense 800
Advertising Expense 500
Insurance Expense 300
Supplies Expense 1,250
Depreciation Expense 550
Interest Expense 270
Retained Earnings 3,080