Q:

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

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Other data:
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1. The balance in prepaid insurance is a one-year premium paid on June 1, 2012.

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2. An inventory count on August 31 shows $650 of supplies on hand.

3. Annual depreciation rates are buildings (4%) and equipment (10%). Salvage value is estimated
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to be 10% of cost.
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4. Unearned Rent Revenue of $3,800 was earned prior to August 31.

5. Salaries of $375 were unpaid at August 31.
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6. Rentals of $800 were due from tenants at August 31.

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7. The mortgage interest rate is 8% per year.

Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31.
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(Omit explanations.)
(b) Prepare an adjusted trial balance on August 31.

A:

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 (a) 1. Aug. 31 Insurance Expense ($4,500 X 3/12)....................................................................................
1,125

Prepaid Insurance......................................................................................................
1,125

2. Aug. 31 Supplies Expense ($2,600 – $650)......................................................................................

1,950

Supplies.....................................................................................................................
1,950

3. Aug. 31 Depreciation Expense.........................................................................................................

1,080

Accumulated Depreciation—
Buildings................................................................................................................
1,080

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($120,000 – $12,000 = $108,000;

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$108,000 X 4% = $4,320 per year;

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$4,320 X 3/12 = $1,080)

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Aug. 31 Depreciation Expense.........................................................................................................
360

Accumulated Depreciation—
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Equipment..............................................................................................................
360
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($16,000 – $1,600 = $14,400;

$14,400 X 10% = $1,440;

$1,440 X 3/12 = $360)

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4. Aug. 31 Unearned Rent Revenue.....................................................................................................

3,800
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Rent Revenue............................................................................................................
3,800
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5. Aug. 31 Salaries and Wages Expense...............................................................................................

375
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Salaries and Wages Payable......................................................................................

375

6. Aug. 31 Accounts Receivable...........................................................................................................

800

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 Rent Revenue............................................................................................................
800

7. Aug. 31 Interest Expense..................................................................................................................

1,000

Interest Payable

[($50,000 X 8%) X 3/12]......................................................................................

1,000

(b) UHURA RESORT

Adjusted Trial Balance

August 31, 2012

Debit Credit

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Cash............................................................................................ $ 19,600

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Accounts Receivable.................................................................. 800

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Prepaid Insurance ($4,500 – $1,125).......................................... 3,375
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Supplies ($2,600 – $1,950)......................................................... 650
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Land............................................................................................ 20,000
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Buildings..................................................................................... 120,000

Accumulated Depreciation—Buildings...................................... $ 1,080

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Equipment................................................................................... 16,000
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Accumulated Depreciation—Equipment.................................... 360

Accounts Payable....................................................................... 4,500

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Unearned Rent Revenue ($4,600 – $3,800)............................... 800

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Salaries and Wages Payable........................................................ 375

Interest Payable........................................................................... 1,000

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Mortgage Payable....................................................................... 50,000

Common Stock........................................................................... 100,000

Dividends.................................................................................... 5,000

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 Rent Revenue ($86,200 + $3,800 + $800)................................. 90,800

Salaries and Wages Expense

($44,800 + $375)..................................................................... 45,175

Utilities Expenses....................................................................... 9,200

Maintenance and Repairs Expenses........................................... 3,600

Insurance Expense...................................................................... 1,125

Supplies Expense........................................................................ 1,950

Depreciation Expense................................................................. 1,080

Depreciation Expense................................................................. 360

Interest Expense.......................................................................... 1,000

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$248,915 $248,915

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This study source was downloaded by 100000832262985 from CourseHero.com on 09-20-2021 01:30:11 GMT -05:00

https://www.coursehero.com/file/15016451/accounting-31/
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