P3-2A Mac's Motel opened for business on May 1, 2017. Its trial balance before adjust- ment on May 31 is as follows. MAC'S MOTEL Trial Balance Мay 31, 2017 Account Number Debit $ 3,500 2,080 2,400 12,000 60,000 15,000 Credit Cash 101 126 Supplies Prepaid Insurance Land Buildings Equipment Accounts Payable Unearned Rent Revenue Mortgage Payable Owner's Capital Rent Revenue Advertising Expense Salaries and Wages Expense Utilities Expense 130 140 141 149 201 $ 4,800 3,300 40,000 41,380 10,300 208 275 301 429 610 600 726 3,300 732 900 $99,780 $99,780 In addition to those accounts listed on the trial balance, the chart of accounts for Mac's Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation-Buildings, No. 150 Accumulated Depreciation-Equipment, No. 212 Sala- ries 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, 2017. 2. A count of supplies shows $750 of unused supplies on May 31. 3. Annual depreciation is $3,000 on the buildings and $1,500 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 $750 are accrued and unpaid at May 31. Instructions (a) Journalize the adjusting entries on May 31. (b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.) (c) Prepare an adjusted trial balance on May 31. (d) Prepare an income statement and an owner's equity statement for the month of May and a balance sheet at May 31.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 8 images
