BE2
a’ Prepaid Insurance
Adjustment may be required because the portion of insurance that has been used or expired during the
accounting period needs to be recognized as an expense.
b’ Depreciation Expense
May need to be recorded to match the cost of these assets with the revenue they help generate during the
accounting period.
c’ Unearned Service Revenue
Adjustments are needed to recognize the portion of revenue that corresponds to the services rendered during the
accounting period.
d’ Interest Payable
Adjustments are necessary to recognize the interest expense that has accrued during the accounting period but
has not been paid.
BE3
(a)
(1) Prepaid expenses
(2) Assets overstated and expenses understated
(b)
(1) Accrued revenues
(2) Assets understated and revenues understated
(c)
(1) Accrued expenses
(2) Liabilities understated and revenues overstated
(d)
(1) Accrued revenues
(2) Assets understated and revenues understated
E2
(a) 8. Going concern assumption.
(b) 1. Economic entity assumption.
(c) 7. Full disclosure principle
(d) 3. Monetary unit assumption.
(e) 6. Materiality.
(f) 4. Periodicity assumption.
(g) 2. Expense recognition principle.
(h) 5. Historical cost principle.
E8
(a)
(1) Accrued revenues
(2) Assets understated and revenues understated
(b)
(1) Prepaid expenses
(2) Supplies overstated and expenses understated
(c)
(1) Accrued expenses
(2) Liabilities understated and expenses understated
(d)
(1) Unearned revenues
(2) liability understated and revenues understated
(e)
(1) accrued expenses
(2) liabilities understated and expenses understated
(f)
(1) Prepaid expenses
(2) assets overstated and expenses understated
P3A
(a)
Oct. 31Insurance Expenses 450
Prepaid insurance 450
===============================================================================
=====
Supplies Expenses 1,550
Supplies 1,050
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=====
Depreciation Expense: Building 300
Depreciation Expense: Equipment 250
Accumulated Expenses: Building 300
Accumulated Expenses: Equipment 250
===============================================================================
=====
Interest Expense 180
Mortgage payable 180
===============================================================================
=====
Unearned rent revenue 2,500
Rent revenue 2,500
===============================================================================
=====
Salaries and wages expenses 900
Salaries and wages payable 900
(b)
Prepaid Insurance Insurance Expense
May 1 1800 May 31 Adj. 450 May 31 Adj. 450
May 31 Bal. May 31 Bal. 450
1350
Supplies Supplies Expense
May 1 2600 May 31 Adj. 1550 May 31 Adj. 1550
May 31 Bal. May 31 Bal. 1550
1050
Building
May 1 70000
May 31 Bal.
70000
Accumulated Depreciation - Building Depreciation expense
May 31 Adj. 300 May 31 Adj. 300
May 31 Bal. 300 May 31 Bal. 300
Equipment
May 1 16800
May 31 Bal.
16800
Accumulated Depreciation – Equipment Depreciation expense
May 31 Adj. 250 May 31 Adj. 250
May 31 Bal. 250 May 31 Bal. 250
Interest expense Mortgage payable
May 1 Adj. May 31 Adj. 180
180 May 31 Bal.
May 31 Bal. 180 36180
Unearned rent revenue Rent revenue
May 1 3300 May 1 9000
May 31 Adj. May 31 Adj. 2500
2500
May 31 Bal. 800 May 31 Bal.
11,500
Salaries and wages expense Salaries and wages payable
May 31 Adj. 900 May 31 Adj. 900
May 31 Bal. 3900 May 31 Bal. 3900
(c)
MOTO HOTEL
Adjusted trial balance
May 31,2017
Cash 2,500
Supplies 1,050
Prepaid Insurance 1,350
Land 15,000
Building 70,000
Equipment 16,800
Accumulated Expenses: Building 300
Accumulated Expenses: Equipment 250
Account Payable 4,700
Unearned rent revenue 800
Mortgage payable 36,180
Common stock 60,000
Rent revenue 11,500
Salaries and wages payable 900
Salaries and wages expense 3,900
Utilities expense 800
Supplies expense 1,550
Insurance expense 450
Interest expense 180
Advertising expense 500
Depreciation expense 550
114630 114630
(d)
MOTO HOTEL
Income Statement
For the Month Ended May 31, 2017
Revenue
Rent revenues 11,500
Expenses
Salaries and wages expenses 3900
Utilities expense 800
Supplies expense 1550
Insurance expenses 450
Interest expense 180
Advertising expenses 500
Depreciation expenses: Building 300
Depreciation expenses: Equipment 250
Total expenses 7930
Net income: 3570
MOTO HOTEL
Retained eanring statement
For the month ended May 31, 2017
Retained earnings, May 1 0
Add: Net income 3570
Retained earnings, May 31 3570
MOTO HOTEL
Classified Balance Sheet
May 31, 2017
Assets
Current Assets
Cash 2500
Supplies 1050
Prepaid Insurance 1350
Total current assets 4900
PPE
Land 15000
Building 70000
Accumulated Expenses: Building (300) 69700
Equipment 16800
Accumulated Expenses: Equipment (250) 16550 101250
Total current assets 106150
Liabilities and stockholders’ equity
Current liabilities
Account Payable 4700
Salaries and wages payable 900
Unearned rent revenue 800
Total current liabilities 6400
Long-term liabilities
Mortgage payable 36180
Total liabilities 42580
Stockholders’ equity
Common stock 60000
Retained earnings 3570
Total stockholders’ equity 63570
Total liabilities and stockholders’ equity 106150
(e)
Accounts should be closed on May 31: Revenue, expense
