Waterway Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows. WATERWAY RESORT TRIAL BALANCE AUGUST 31, 2020 Debit Credit Cash $25,300 Prepaid Insurance 10,200 Supplies 8,300 Land 28,000 Buildings 128,000 Equipment 24,000 Accounts Payable $10,200 Unearned Rent Revenue 10,300 Mortgage Payable 68,000 Common Stock 104,700 Retained Earnings 9,000 Dividends 5,000 Rent Revenue 84,200 Salaries and Wages Expense 44,800 Utilities Expenses 9,200 Maintenance and Repairs Expense 3,600 $286,400 $286,400 Other data: 1. The balance in prepaid insurance is a one-year premium paid on June 1, 2020. 2. An inventory count on August 31 shows $445 of supplies on hand. 3. Annual depreciation rates are (a) buildings (4%) (b) equipment (10%). Salvage value is estimated to be 10% of cost. 4. Unearned Rent Revenue of $4,172 was earned prior to August 31. 5. Salaries of $365 were unpaid at August 31. 6. Rentals of $843 were due from tenants at August 31. (Use Accounts Receivable account.) 7. The mortgage interest rate is 8% per year.

Question Completion:

Journalize the adjusting entries for the three months of 2020.

Waterway Resort

Adjusting Journal Entries:

No. Date     Account Titles and Explanation     Debit       Credit

1.    Aug. 31 Insurance Expense                       $2,550

                  Prepaid Insurance                                            $2,550

To record insurance expense for the three months' period.

2.   Aug. 31 Supplies Expense                         $7,855

                  Supplies                                                           $7,855

To record supplies expense for the three months' period.

3.   Aug. 31 Depreciation Expense - Building $1,280

                  Accumulated Depreciation - Building           $1,280

To record depreciation expense for the three months' period.

3.   Aug. 31 Depreciation Expense-Equipment $540

                  Accumulated Depreciation - Equipment        $540

To record depreciation expense for the three months' period.

4.  Aug. 31 Unearned Rent Revenue              $4,172

                 Rent Revenue                                                $4,172

To record rent revenue earned.

5.  Aug. 31 Salaries Expense                            $365

                 Salaries Payable                                             $365

To record accrued salaries expense.

6.  Aug. 31 Accounts Receivable                     $843

                 Rent Revenue                                                $843

To record accounts receivable due.

7.  Aug. 31 Interest Expense                        $1,360

                 Interest Payable                                         $1,360

To record mortgage interest expense.

Explanation:

a) Data and Calculations:

WATERWAY RESORT TRIAL BALANCE AUGUST 31, 2020

                                                              Debit         Credit

Cash                                                   $25,300

Prepaid Insurance                                10,200

Supplies                                                 8,300

Land                                                    28,000

Buildings                                            128,000

Equipment                                          24,000

Accounts Payable                                                  $10,200

Unearned Rent Revenue                                        10,300

Mortgage Payable                                                  68,000

Common Stock                                                     104,700

Retained Earnings                                                   9,000

Dividends                                            5,000

Rent Revenue                                                       84,200

Salaries and Wages Expense          44,800

Utilities Expenses                              9,200

Maintenance and Repairs Expense 3,600

Totals                                          $286,400    $286,400

b) Adjusting transactions:

1. Insurance Expense $2,550 Prepaid Insurance $2,550 ($10,200 * 3/12)

2. Supplies Expense $7,855 Supplies $7,855 ($8,300 - $445)

3. Depreciation Expense - Building $1,280 Accumulated Depreciation - Building $1,280 ($128,000 * 4% * 3/12)

3. Depreciation Expense - Equipment $540 Accumulated Depreciation - Equipment $540 ($24,000 -$2,400 * 10% * 3/12)

4. Unearned Rent Revenue $4,172 Rent Revenue $4,172

5. Salaries Expense $365 Salaries Payable $365

6. Accounts Receivable $843 Rent Revenue $843

7. Interest Expense $1,360 Interest Payable $1,360 ($68,000 * 8% * 3/12)

88 because 4 plus 4 equals 8. 40 plus 40 equals 80. 80 plus 8 equals 88

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return