MBA Program

Accounting Principles Course

Exercise (9)

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

Maquoketa River Resort

Trial Balance
August 31, 2022
Account Debit Credit
Cash $19,600
Supplies 3,300
Prepaid Insurance 6,000
Land 25,000
Buildings 125,000
Equipment 26,000
Accounts Payable $6,500
Unearned Service Revenue 7,400
Mortgage Payable 80,000
Owner’s Capital 100,000
Owner’s Drawings 5,000
Rent Revenue 80,000
Maintenance and Repairs Expense 3,600
Salaries and Wages Expense 51,000
Utilities Expense 9,400
Total $273,900 $273,900

Other data:
1. Insurance expires at the rate of $300 per month.
2. A count on August 31 shows $800 of supplies on hand.
3. Annual depreciation is $6,000 on buildings and $2,400 on equipment.
4. Unearned rent revenue of $4,800 was earned prior to August 31.
5. Salaries of $400 were unpaid on August 31.
6. Rentals of $4,000 were due from tenants on 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. Enter the trial balance amounts and post the adjusting entries.
(c) Prepare an adjusted trial balance on August 31.
Solution
Adjusting entries
Insurance Expense....................................................................... 900
Prepaid Insurance........................................................................900

Supplies Expense......................................................................2,500
Supplies................................................................................... 2,500

Depreciation Expense - Buildings............................................1,500

Accumulated Depreciation - Buildings....................................1,500

Depreciation Expense - Equipment............................................600

Accumulated Depreciation - Equipment....................................600

Unearned Rent Revenue.............................................................4,800

Rent Revenue ..........................................................................4,800

Salaries Expense.........................................................................400
Salaries Payable..........................................................................400

Accounts Receivable..................................................................4,000
Rent Revenue ..........................................................................4,000

Interest Expense ......................................................................... 600

Interest Payable..........................................................................600

Posting to Ledger

Cash
1/8 19,600
End. Bal. 19,600

Supplies
1/8 3,300 Adj. 2,500
End. Bal. 800

Prepaid Insurance
1/8 6,000 Adj. 900
End. Bal. 5,100
Land
1/8 25,000
End. Bal. 28,000

Buildings
1/8 125,000
End. Bal. 125,000

Equipment
1/8 26,000
End. Bal. 26,000

Accounts Payable
1/8 6,500
End. Bal. 6,500

Unearned Rent Revenue

1/8 7,400
End. Bal. 7,400

Mortgage Payable
1/8 80,000
End. Bal. 80,000

Owner’s Capital
1/8 100,000
End. Bal. 100,000

Owner’s Drawings
1/8 5,000
End. Bal. 5,000

Rent Revenue
1/8 80,000
Adj. 4,800
Adj. 4,000
End. Bal. 88,800

Maintenance and Repairs Expense

1/8 3,600
End. Bal. 3,600

Salaries and Wages Expense

1/8 51,000
Adj. 400
End. Bal. 51,400

Utilities Expense
 1/8 9,400
End. Bal. 9,400
Insurance Expense
Adj. 900
End. Bal. 900
Supplies Expense
Adj. 2,500
End. Bal. 2,500

Depreciation Expense - Buildings

Adj. 1,500
End. Bal. 1,500

Accumulated Depreciation - Buildings

Adj. 1,500
End. Bal. 1,500

Depreciation Expense - Equipment

Adj. 600
End. Bal. 600

Accumulated Depreciation - Equipment

Adj. 600
End. Bal. 600

Salaries and Wages Payable

Adj. 400
End. Bal. 400

Accounts Receivable
Adj. 4,000
End. Bal. 4,000

Interest Expense
Adj. 600
End. Bal. 600

Interest Payable
Adj. 600
End. Bal. 600

Maquoketa River Resort

 Adjusted Trial Balance
August 31, 2022
Account Debit Credit
Cash $19,600
Supplies 800
Prepaid Insurance 5,100
Land 25,000
Buildings 125,000
Equipment 26,000
Accounts Payable $6,500
Unearned Service Revenue 2,600
Mortgage Payable 80,000
Owner’s Capital 100,000
Owner’s Drawings 5,000
Rent Revenue 88,800
Maintenance and Repairs Expense 3,600
Salaries and Wages Expense 51,400
Utilities Expense 9,400
Accounts Receivable 4,000
Salaries and Wages Payable 400
Insurance Expense 900
Supplies Expense 2,500
Depreciation Expense - Buildings 1,500
Accumulated Depreciation - Buildings 1,500
Depreciation Expense - Equipment 600
Accumulated Depreciation - Equipment 600
Interest Expense 600
Interest Payable 600
Total $281,000 $281,000