Problem 3-2A

Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows.

NEOSHO RIVER RESORT
Trial Balance
August 31, 2010
Account Number			Debit		Credit
101		Cash	$19,600
126		Supplies	3,300
130		Prepaid Insurance	6,000
140		Land	25,000
143		Cottages	125,000
149		Furniture	26,000
201		Accounts Payable			$6,500
209		Unearned Rent			7,400
275		Mortgage Payable			80,000
301		P. Harder, Capital			100,000
306		P. Harder, Drawing	5,000
429		Rent Revenue			80,000
622		Repair Expense	3,600
726		Salaries Expense	51,000
732		Utilities Expense	9,400
			$273,900		$273,900

In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation-Cottages, No. 150 Accumulated Depreciation-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, 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 $400 per month.
2. A count on August 31 shows $600 of supplies on hand.
3. Annual depreciation is $6,000 on cottages and $2,400 on furniture.
4. Unearned rent of $4,100 was earned prior to August 31.
5. Salaries of $400 were unpaid at August 31.
6. Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.)
7. The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)

Instructions

(a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 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.)  (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)

(c) Prepare an adjusted trial balance on August 31. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)

(d) Prepare an income statement and an owner’s equity statement for the 3 months ending August 31 and a balance sheet as of August 31. (List multiple entries from largest to smallest eg 10, 5, 3, 2. If amounts are the same, list alphabetically.  For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2, with accounts payable listed first.)

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