The Skyline Motel opened for business on May 1, 2015. Its trial balance before adjustment on May 31 is as follows.
SKYLINE MOTEL
Trial Balance
May 31, 2015
Account Number Debit Credit
101 Cash $ 3,537
126 Supplies 2,051
130 Prepaid Insurance 2,304
140 Land 14,070
141 Buildings 59,040
149 Equipment 14,640
201 Accounts Payable $ 11,880
208 Unearned Rent Revenue 3,060
275 Mortgage Payable 40,000
301 Common Stock
35,423
429 Rent Revenue 10,096
610 Advertising Expense
569
726 Salaries and Wages Expense 3,327
732 Utilities Expense 921
$100,459 $100,459
In addition to those accounts listed on the trial balance, the chart of accounts for Skyline Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation Expense, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.
Other data:
1. Prepaid insurance is a 1-year policy starting May 1, 2015.
2. A count of supplies shows $723 of unused supplies on May 31.
3. Annual depreciation is $2,952 on the buildings and $1,464 on equipment.
4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5. Two-thirds of the unearned rent revenue has been earned.
6. Salaries of $799 are accrued and unpaid at May 31.
Collapse question part
(a)
Journalize the adjusting entries on May 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
May 31
Prepaid Insurance 2,304
Insurance Expense 2,304
Supplies 2,051
Supplies Expense 1,328
Supplies 723
Accumulated Depreciation—Buildings 2,952
Depreciation Expense 2,952
Accumulated Depreciation—Equipment 1,464
Depreciation Expense 1,464
Unearned Rent Revenue 2,040
Rent Revenue 2,040
Salaries and Wages Payable 799
Salaries and Wages Expense 799
Interest Payable 240
Interest Expense 240
To journalize the adjusting entries on May 31, we need to analyze the given data and identify which accounts need to be adjusted.
1. Prepaid Insurance:
The prepaid insurance is a 1-year policy starting May 1, 2015. Therefore, on May 31, we need to adjust the amount of insurance that has been used up. The remaining insurance amount can be calculated as follows:
Total insurance amount / Number of months in the policy = Monthly insurance amount
Monthly insurance amount * Number of months expired = Insurance used up
Prepaid Insurance - Insurance used up = Adjusted Prepaid Insurance
In this case:
Prepaid Insurance = $2,304
Number of months expired = 1
Adjusting Entry:
Date Account Title Debit Credit
May 31 Insurance Expense $???? (To record insurance used up)
May 31 Prepaid Insurance ??? $???? (To adjust prepaid insurance)
2. Supplies:
A count of supplies shows $723 of unused supplies on May 31. We need to adjust the supplies account for the amount of supplies used up.
Adjusting Entry:
Date Account Title Debit Credit
May 31 Supplies Expense $???? (To record supplies used)
May 31 Supplies ??? $???? (To adjust supplies)
3. Depreciation:
Annual depreciation is $2,952 on the buildings and $1,464 on equipment. We need to allocate the monthly depreciation expense for May.
Monthly depreciation expense = Annual depreciation / 12 months
Adjusting Entry for Buildings:
Date Account Title Debit Credit
May 31 Depreciation Expense $???? (To record depreciation expense)
May 31 Accumulated Depreciation—Buildings ??? $???? (To adjust accumulated depreciation—buildings)
Adjusting Entry for Equipment:
Date Account Title Debit Credit
May 31 Depreciation Expense $???? (To record depreciation expense)
May 31 Accumulated Depreciation—Equipment ??? $???? (To adjust accumulated depreciation—equipment)
4. Unearned Rent Revenue:
Two-thirds of the unearned rent revenue has been earned. We need to adjust the unearned rent revenue account for the amount earned.
Amount earned = Unearned Rent Revenue * 2/3
Adjusting Entry:
Date Account Title Debit Credit
May 31 Unearned Rent Revenue $???? (To record rent revenue earned)
May 31 Rent Revenue ??? $???? (To adjust unearned rent revenue)
5. Salaries and Wages:
Salaries of $799 are accrued and unpaid at May 31. We need to adjust the salaries and wages expense and salaries and wages payable accounts.
Adjusting Entry:
Date Account Title Debit Credit
May 31 Salaries and Wages Expense $???? (To record accrued salaries)
May 31 Salaries and Wages Payable ??? $???? (To adjust salaries payable)
Note: The amounts to be entered in the debit and credit columns will depend on the calculated values. Be sure to determine the correct amounts before journalizing the entries.
To journalize the adjusting entries on May 31, we need to consider the given information. Let's go through each adjustment and journalize the entries:
1. Prepaid insurance is a 1-year policy starting May 1, 2015:
- Debit: Insurance Expense
- Credit: Prepaid Insurance
2. A count of supplies shows $723 of unused supplies on May 31:
- Debit: Supplies Expense
- Credit: Supplies
3. Annual depreciation is $2,952 on buildings and $1,464 on equipment:
- Debit: Depreciation Expense (Building)
- Debit: Depreciation Expense (Equipment)
- Credit: Accumulated Depreciation (Building)
- Credit: Accumulated Depreciation (Equipment)
4. The mortgage interest rate is 12%:
- Debit: Interest Expense
- Credit: Interest Payable
5. Two-thirds of the unearned rent revenue has been earned:
- Debit: Unearned Rent Revenue
- Credit: Rent Revenue
6. Salaries of $799 are accrued and unpaid at May 31:
- Debit: Salaries and Wages Expense
- Credit: Salaries and Wages Payable
The journal entries for each adjustment are as follows:
Date | Account Titles and Explanation | Debit | Credit
----------------------------------------------------------------------------
May 31 | Insurance Expense | | $2304
Prepaid Insurance | $2304 |
May 31 | Supplies Expense | | $1328
Supplies | $1328 |
May 31 | Depreciation Expense (Building) | | $246
Depreciation Expense (Equipment) | | $122
Accumulated Depreciation (Building) | $246 |
Accumulated Depreciation (Equipment) | $122 |
May 31 | Interest Expense | | $400
Interest Payable | $400 |
May 31 | Unearned Rent Revenue | | $2040
Rent Revenue | $2040 |
May 31 | Salaries and Wages Expense | | $799
Salaries and Wages Payable | $799 |
Please note that these journal entries are based on the given information. Make sure to double-check if any additional information or adjustments are required.