(a) Explanation Adjusting entries : Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. The adjusting journal entries in the book of Hotel M at the end of the May month are as follows: 1. An adjusting entry for insurance expense: In this case, Hotel M recognized the insurance expenses at the end of the May month. So, the necessary adjusting entry that the Hotel M should record to recognize the insurance expense is as follows: Date Account Titles and Description Debit ($) Credit ($) May 31, 2017 Insurance expense 450 Prepaid insurance 450 (To record the insurance expenses incurred at the end of the May) Table (1) Description: Insurance expense decreases the value of stockholders’ equity by $450; hence debit the insurance expense for $450. Prepaid insurance is an asset, and it decreases the value of asset by $450, hence credit the prepaid insurance for $450. 2. An adjusting entry for Supplies expenses: In this case, Hotel M recognized the supplies expenses at the end of the May month. So, the necessary adjusting entry that the Hotel M should record to recognize the supplies expense is as follows: Date Account Titles and Description Debit ($) Credit ($) May 31, 2017 Supplies expenses (1) 1,550 Supplies 1,550 (To record the supplies expenses incurred at the end of the May) Table (2) Working note: Calculate the value of supplies expense at end of the May month Supplies expense = ( The amount of supplies begining of May ) − ( The amount of supplies on hand at the end of the month ) = ( $ 2 , 600 – $ 1 , 050 ) = $ 1 , 550 (1) Hence, the value of supplies expenses at the end of the May month is $1,550 . Description: Supplies expense decreases the value of stockholders’ equity by $1,550; hence debit the supplies expenses for $1,550. Supplies are an asset, and it decreases the value of asset by $1,550, hence credit the supplies for $1,550. 3. An adjusting entry for depreciation expense: In this case, Hotel M recognized the depreciation expense at end of the May month. So, the necessary adjusting entry that the Hotel M should make to record the depreciation expense at end of the month is as follows: On the building: Date Account Titles and Description Debit ($) Credit ($) May 31, 2017 Depreciation expense (2) 300 Accumulated depreciation -Building 300 (To record the depreciation expenses allocated at end of the month) Table (3) Working note: Calculate the value of depreciation expense at the end of the May month Depreciation expense = ( Annual depreciation expense × No . of month occured (May month) No . of months in a year ) =$3,600× 1 12 =$300 (2) Description: Depreciation expense decreases the value of stockholders’ equity by $300; hence debit the depreciation expense for $300. Accumulated depreciation is a contra asset account, and it decreases the value of asset by $300 hence, credit the accumulated depreciation for $300 (b) To determine Post the transaction to T-accounts of Hotel M on May 31, 2017. (c) To determine Prepare the adjusted trial balance of Hotel M on May 31, 2017. (d) To determine Prepare the income statement, statement of retained earnings , and classified balance sheet of Hotel M. (e) To determine Identify the accounts would be closed at the end of the May month.

Accounting, Binder Ready Version: Tools for Business Decision Making - Standalone book

6th Edition

ISBN: 9781119191674

Author: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

Publisher: WILEY

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Question

Chapter 4, Problem 3AP

(a)

To determine

Prepare the adjusting journal entries in the book of Hotel M at May 31, 2017.

(b)

To determine

Post the transaction to T-accounts of Hotel M on May 31, 2017.

(c)

To determine

Prepare the adjusted trial balance of Hotel M on May 31, 2017.

(d)

To determine

Prepare the income statement, statement of retained earnings, and classified balance sheet of Hotel M.

(e)

To determine

Identify the accounts would be closed at the end of the May month.

Expert Solution & Answer

Chapter 4 Solutions

Accounting, Binder Ready Version: Tools for Business Decision Making - Standalone book

Ch. 4 - Prob. 1Q Ch. 4 - Prob. 2Q Ch. 4 - Prob. 3Q Ch. 4 - Prob. 4Q Ch. 4 - Prob. 5Q Ch. 4 - Prob. 6Q Ch. 4 - Prob. 7Q Ch. 4 - Prob. 8Q Ch. 4 - Prob. 9Q Ch. 4 - Prob. 10Q

Ch. 4 - Prob. 11Q Ch. 4 - Prob. 12Q Ch. 4 - Prob. 13Q Ch. 4 - Prob. 14Q Ch. 4 - Prob. 15Q Ch. 4 - Prob. 16Q Ch. 4 - Prob. 17Q Ch. 4 - Prob. 18Q Ch. 4 - Prob. 19Q Ch. 4 - Prob. 20Q Ch. 4 - Prob. 21Q Ch. 4 - Prob. 22Q Ch. 4 - Prob. 23Q Ch. 4 - Prob. 24Q Ch. 4 - Prob. 25Q Ch. 4 - Prob. 26Q Ch. 4 - Prob. 27Q Ch. 4 - Prob. 28Q Ch. 4 - Prob. 29Q Ch. 4 - Prob. 30Q Ch. 4 - Prob. 31Q Ch. 4 - Prob. 32Q Ch. 4 - Prob. 33Q Ch. 4 - Prob. 34Q Ch. 4 - Prob. 35Q Ch. 4 - Prob. 36Q Ch. 4 - Prob. 1BE Ch. 4 - Prob. 2BE Ch. 4 - Prob. 3BE Ch. 4 - Prob. 4BE Ch. 4 - Prob. 5BE Ch. 4 - Prob. 6BE Ch. 4 - Prob. 7BE Ch. 4 - Prob. 8BE Ch. 4 - Prob. 9BE Ch. 4 - Prob. 10BE Ch. 4 - Prob. 11BE Ch. 4 - Prob. 12BE Ch. 4 - Prob. 13BE Ch. 4 - Prob. 14BE Ch. 4 - Prob. 15BE Ch. 4 - Prob. 1DIE Ch. 4 - Prob. 2DIE Ch. 4 - Prob. 3DIE Ch. 4 - Prob. 4ADIE Ch. 4 - Prob. 4BDIE Ch. 4 - Prob. 1E Ch. 4 - Prob. 2E Ch. 4 - Prob. 3E Ch. 4 - Prob. 4E Ch. 4 - Prob. 5E Ch. 4 - Prob. 6E Ch. 4 - Prob. 7E Ch. 4 - Prob. 8E Ch. 4 - Prob. 9E Ch. 4 - Prob. 10E Ch. 4 - Prob. 11E Ch. 4 - Prob. 12E Ch. 4 - Prob. 13E Ch. 4 - Prob. 14E Ch. 4 - Prob. 15E Ch. 4 - Prob. 17E Ch. 4 - Prob. 18E Ch. 4 - Prob. 20E Ch. 4 - Prob. 21E Ch. 4 - Prob. 22E Ch. 4 - Prob. 23E Ch. 4 - Prob. 2AP Ch. 4 - Prob. 3AP Ch. 4 - Prob. 4AP Ch. 4 - Prob. 5AP Ch. 4 - Prob. 6AP Ch. 4 - Prob. 7AP Ch. 4 - Prob. 1CACR Ch. 4 - Prob. 2CACR Ch. 4 - Prob. 3CACR Ch. 4 - Prob. 4CACR Ch. 4 - Prob. 1EYCT Ch. 4 - Prob. 2EYCT Ch. 4 - Prob. 3EYCT Ch. 4 - Prob. 4EYCT Ch. 4 - Prob. 6EYCT Ch. 4 - Prob. 7EYCT Ch. 4 - Prob. 8EYCT Ch. 4 - Prob. 9EYCT Ch. 4 - Prob. 1IFRS

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