Name: Nguyen Ngoc Mai

CHAPTER 4 EXERCISES

Ex 1: BE4-2

a) Prepaid Insurance​: ​To recognize insurance expired during the period

b) Depreciation Expense​: To allocate the cost of an asset to expense
c) Unearned Service Revenue: To determine which services were provided during the
accounting period
d) Interest Payable:​ To recognize interest expense during the accounting period

Ex 2: BE4-3

ADJUSTMENT
TYPE STATUS BEFORE ADJ
DATA

Prepaid Expense Assets overstated

a
Expenses understated
Accrued Revenue Assets understated
b
Revenue understated
Accrued Expense Expenses understated
c
Liabilities understated

Unearned Revenue Liabilities overstated

d
Revenue understated

Ex 3: E4-2

a. 8 e. 6
b. 1 f. 4
c. 7 g. 2
d. 3 h. 5
Ex 4: E4-8

TYPE ACCOUNTS BEFORE ADJ

Accrued revenue Assets understated
a
Revenue understated
Prepaid expense Assets overstated
b.
Expenses understated
Accrued expense Expense understated
c.
Liabilities understated
Unearned revenue Liabilities overstated
d.
Revenue understated
Accrued expense Expense understated
e.
Liabilities understated
Prepaid expense Assets overstated
f.
Expense understated

Ex 5: P4-3A
a)
May 31 1 Insurance expense 450
Prepaid expense 450
(To record insurance expired)
2 Supplies expense ($2,600- $1,050) 1550
Supplies 1550
(To record supplies used)
3 Depreciation expense- Buildings ($3,600 : 12 months) 300
Depreciation expense- Equipments ($3,000 : 12) 250
Accumulated depreciation- Buildings 300
Accumulated depreciation- Equipment 250
(To record monthly depreciation)
4 Mortgage expense ($36,000 x 6% : 12) 180
 Mortgage payable 180
(To record interest on mortgage payable)
5 Unearned rent revenue 2500
Rent revenue 2500
(To record revenue for rent earned)
6 Salaries and wages expenses 900
Salaries and wages payable 900
(To record accrued salaries)

b)
GENERAL LEDGER
Cash Mortgage Payable
May 31 $2,500 May 31 $36,000
Bal. $2,500 May 31 Bal. $36,000

Prepaid Insurance Rent Revenue

May 31 $1,800 May 31 $450 May 31 $9,000
May 31 Bal. $1,350 May 31 $2,500
Bal. $11,500
Supplies
May 31 $2,600 May 31 $1,550 Salaries and Wages Payable
May 31 Bal. $1,050 May 31 $900
May 31 Bal. $900
Land
May 31 $15,000 Interest Payable
Bal. $15,000 May 31 $180
May 31 Bal. $180
Buildings
May 31 $70,000 May 31 $300 Insurance Expense
Bal. $69,700 May 31 $450
 May 31 Bal. $450
Equipment
May 31 $16,800 May 31 $250 Salaries and Wages Expense
Bal. $16,550 May 31 $3,000
May 31 $900
Accumulated Appreciation- Equipment May 31 Bal. $3,900
May 31 $250
Bal. $250 Utility Expense
May 31 $800
Accumulated Appreciation- Buildings May 31 Bal. $800
May 31 $300
Bal. $300 Advertising Expense
May 31 $500
Accounts Payable May 31 Bal. $500
May 31 $4,700
Bal. $4,700 Supplies Expense
May 31 $1,550
Unearned Rent Revenue May 31 Bal. $1,550
May 31 $2,500 May 31 $3,300
May 31 Bal. $800 Common Stock
May 31 $60,000
May 31 Bal. $60,000

c)
MOTO HOTEL
Adjusted Trial Balance
May 31, 2017
Debit Credit
Cash $2,500
Supplies 1,050
 Prepaid Insurance 1,350
Land 15,000
Buildings 70,000
Equipment 16,800
Accumulated Depreciation- Equipments $250
Accumulated Depreciation- Buildings 300
Accounts Payable 4,700
Interest Payable 180
Salaries and Wages Payable 900
Unearned Rent Revenue 800
Mortgage Payable 36,000
Common Stock 60,000
Rent Revenue 11,500
Salaries and Wages Expense 3,900
Supplies Expense 1,550
Interest Expense 180
Insurance Expense 450
Utilities Expense 800
Advertising Expense 500
Depreciation Expense 550
$114,630 $114,630

d.1)
INCOME STATEMENT
Revenues
Rent Revenue $11,500
Expenses
Salaries and Wages Expense 3,900
Supplies Expense 1,550
Interest Expense 180
Insurance Expense 450
 Utilities Expense 800
Advertising Expense 500
Depreciation Expense 550
NET INCOME $3,570

d.2)
RETAINED EARNINGS STATEMENT
Add: Net Income $3,570
Less: Dividends 0
Retained Earnings 31 May, 2017 $3,570

d.3)
MOTO HOTEL
BALANCE SHEET
May 31, 2017
Assets
Current Assets
Cash $2,500
Prepaid Insurance 1,050
Supplies 1,350
Total Current Assets $4,900
Property, plant and equipment
Land 15,000
Buildings 70,000
Equipments ($16,800- $550) 16,800
Total PPE 101,800
Total Assets $106,150

Liabilities and Stockholders' Equity

Liabilities
Current Liabilities
 Accounts Payable $4,700
Interest Payable 180
Salaries and Wages Payable 900
Unearned Rent Revenue 800
Long- term Liabilities
Mortgage Payable 36,000
Total Liabilities $42,580
Stockholders' Equity
Common Stock $60,000
Ret. Earnings May 31 3,570
Total Stockholders' Equity $63,570
Total Liabilities and Stockholders' Equity $106,150

e) Accounts that should be closed on May 31:

Utilities Expense; Salaries and Wages Expense; Insurance Expense; Supplies
Expense; Advertising Expense; Interest Expense; Depreciation Expense and Rent
Revenue.