The Sandhill Hotel opened for business on May 1, 2022. Here is its trial balance before adjustment on May 31. SANDHILL HOTEL Trial Balance May 31, 2022 Debit Credit Cash $ 2,463 Supplies 2,600 Prepaid Insurance 1,800 Land 14,963 Buildings 71,200 Equipment 16,800 Accounts Payable $ 4,663 Unearned Rent Revenue 3,300 Mortgage Payable 37,200 Common Stock 59,963 Rent Revenue 9,000 Salaries and Wages Expense 3,000 Utilities Expense 800 Advertising Expense 500 $114,126 $114,126 Other data: 1. Insurance expires at the rate of $360 per month. 2. A count of supplies shows $1,070 of unused supplies on May 31. 3. (a) Annual depreciation is $3,000 on the building. (b) Annual depreciation is $2,400 on equipment. 4. The mortgage interest rate is 6%. (The mortgage was taken out on May 1.) 5. Unearned rent of $2,510 has been earned. 6. Salaries of $860 are accrued and unpaid at May 31. (a) (b) (c) (d1) (d2) (d3) (e)

1. Journalize the adjusting entries on May 31:

                                                             Debit                 Credit

1. Insurance Expense                          $360

  Insurance Prepaid                                                    $360

  To record insurance expense for the month.

2. Supplies Expense                              $1,530

   Supplies Account                                                    $1,530

   To record supplies expense for the month.

3a. Depreciation Expense - Building      $250

3b. Depreciation Expense - Equipment $200

     Accumulated Depreciation - Building                $250

     Accumulated Depreciation - Equipment           $200

     To record depreciation charge for the month.

4. Mortgage Interest Expense               $186

   Mortgage Interest Payable                                   $186

    To accrue mortgage interest, 6% for 1 month.

5. Unearned Rent Revenue                  $2,510

   Rent Revenue                                                     $2,510

   To record rent earned.

6. Salaries & Wages Expense               $860

   Salaries & Wages Payable                                  $860

   To accrue salaries at May 31.

2. Prepare a ledger using the three-column form of account. Enter the trial balance amounts into the balance column and then post the adjusting entries:

No. Description                       Debit           Credit         Balance

1.     Prepaid Insurance:

      As per Trial Balance                                                   $1,800

      Insurance Expense                                $360            $1,440

      Insurance Expense:

      Prepaid Insurance           $360                                  $360

2.    Supplies Account:

      As per Trial Balance                                                   $2,600

      Supplies Expense                               $1,530             $1,070

     Supplies Expense:

     Supplies Account          $1,530                                   $1,530

3a. Depreciation Exp. - Building $250                              $250

     Accumulated Deprec-Building              $250              $250

3b. Depreciation Exp.- Equipment $200                           $200

     Accumulated Depre- Equipment              $200          $200

4. Mortgage Interest Expense     $186                               $186

   Mortgage Interest Payable                          $186           $186

5. Unearned Rent:

   As per Trial Balance                                                      $3,300

   Rent Revenue                           $2,510                            $790

   Rent Revenue:

   As per Trial Balance                                                      $9,000

   Unearned Rent                                         $2,510         $11,510

6. Salaries & Wages Expense:

   As per Trial Balance                                                      $3,000

   Salaries & Wages Payable     $860                                 $860

  Salaries & Wages Payable:

  Salaries & Wages Expense                           $860         $860        

3. Prepare an adjusted trial balance on May 31, 2022:

                                                    Debit               Credit

Cash                                        $2,463

Supplies                                     1,070

Supplies Expense                     1,530

Prepaid Insurance                     1,440

Insurance Expense                     360

Depreciation - Building              250

Depreciation - Equipment         200

Accumulated Depr-Building                                   250

Accumulated Depr-Equipment                              200

Mortgage Interest Expense        186

Mortgage Interest Payable                                     186

Land                                        14,963

Buildings                                 71,200

Equipment                              16,800

Accounts Payable                                             $ 4,663

Unearned Rent Revenue                                       790

Mortgage Payable                                             37,200

Mortgage Interest Exp              186

Mortgage Interest Payable                                    186

Common Stock                                                 59,963

Rent Revenue                                                     11,510

Salaries and Wages Expense 3,860

Salaries & Wages Payable                                    860

Utilities Expense                        800

Advertising Expense                 500

                                          $115,808            $115,808

4. Prepare an income statement for the month of May:

Rent Revenue                         $11,510

Expenses:

Supplies                  $1,530

Insurance                   360

Salaries & Wages    3,860

Utilities Expense        800

Advertising Expense  500

Depreciation:

   Building                   250

   Equipment              200

Mortgage Interest     186        (7,686)

Net Income                             $3,824

5. Prepare an owner’s equity statement for the month of May:

Common Stock                    $59,963

Retained Earnings                   3,824

Total Equity                         $63,787

6. Prepare a balance sheet at May 31:

Assets:

Cash                                        $2,463

Supplies                                     1,070

Prepaid Insurance                    1,440

Land                                        14,963

Buildings                                 71,200

Equipment                              16,800

Total Assets                      $107,936

Liabilities + Equity:

Accounts Payable                $4,663

Unearned Rent Revenue         790

Mortgage Interest Payable       186

Salaries & Wages Payable       860

Accumulated Depreciation:

  Building                                 250

   Equipment                           200

Mortgage Payable              37,200

Common Stock                  59,963

Retained Earnings                3,824

Total Liabilities +Equity $107,936

Explanation:

a) Adjusting entries are end-of-the-period journal entries used to recognize income or expenses that occurred but are not accurately displayed in your records.  They are made to comply with the accrual concept and the matching principle, which demand that expenses and income should matched to the period they were incurred, whether paid for or not.

b) The three-sided ledger accounts show the debit, credit, and balance columns.  This means that it shows the balance per transaction of any particular account.

c) Mortgage interest is calculated as (6% of $37,200)/12, so as to accrue for one month only.  Other expenses are calculated for one month only.

answer///supply is elastic, and demand is inelastic;