EXERCISE 2

(Source: Principles of Accounting 2nd Edition by Weygant, Chalmers, et al)

The Mercury Motel opened for business on May 1, 2022. Its trial balance before adjustment on May 31,
2022.

MERCURY MOTEL
Trial Balance
As at May 31, 2022

Debit Credit
Cash 25,000
Supplies 19,000
Prepaid Insurance 24,000
Land 150,000
Buildings 700,000
Furniture 168,000
Accounts Payable 53,000
Unearned Rent Income 36,000
Mortgage Payable 350,000
Sue Philips, Capital 600,000
Rent Revenue 92,000
Advertising Expense 5,000
Salaries Expense 30,000
Utilities Expense 10,000
1,131,000 1,131,000

In addition to those accounts listed on the trial balance, the chart of accounts for Mercury Motel also
contains the following: Allowance for Doubtful Accounts, Accumulated Depreciation - Building;
Accumulated Depreciation - Furniture, Salaries Payable; Interest Payable; Depreciation Expense -
Buildings; Depreciation Expense - Furniture; Doubtful Accounts Expense; Supplies Expense; Interest
Expense; Insurance Expense.

Othe data:
1) Insurance expires at the rate of P 2,000 oer month.
2) A count of supplies show P 9,000 of unsued supplies on May 31.
3) Annual depreciation is P 24,000 on the buildings and P 30,000 on Furniture.
4) The mortgage interest rate is 12%. The mortgage was taken out on May 1.
5) Unearned rent revenue of P 25,000 has been earned.
6) Salaries of P 8,000 are accrued and unpaid as at May 31.

Instructions:
1) Prepare the necessary adjusting journal entries for the month of May.
2) Prepare 10-column working paper to prepare financial statements for the month ended May 31,
2022.