ACC201 Financial Accounting: COMPREHENSIVE PROBLEM

Bea’s Bed and Breakfast opened for business on May 1, 2008. Bea serves many individual customers that pay in cash, but also provides rooms for several organizations when they need to send their employees away for a retreat. Bea, therefore, has room rentals on account. She also receives deposits/prepayments from some of her customers. Here is its trial balance before adjustments on December 31, 2008.

Bea’s Bed & Breakfast
Trial Balance
December 31, 2008 Debit Credit Cash 76890 Accounts Receivable 14625 Allowance for Uncollectible Accounts 890 Prepaid Insurance 3600 Supplies 1580 Land 92000 Building 188000 Furniture 24600 Accumulated Depreciation- Building Accumulated Depreciation- Furniture Accounts Payable 8900 Wages Payable 1800 Unearned Revenue 5400 Mortgage Payable 240000 Bea’s Capital 81305 Room Revenues 128150 Restaurant Sales 29250 Food and Beverage Purchases 12400 Salaries Expense 48000 Utilities Expense 17000 Repairs and maintenance Expense 3200 Advertising Expense 1800 Interest expense 12000 495695 495695
1. This is a one-year insurance policy that was effective on May 1, 2008
2. An inventory of Supplies shows $400 of unused supplies on December 31
3. Bea uses the straight line method of depreciation. There is no salvage value for the furniture or the building. The furniture is depreciated over 5 years. The building is depreciated over 40 years.
4. Unearned revenue of $2600 has been earned
5. Salaries of $500 are accrued and unpaid at December 31
6. The mortgage of $240,000 was taken out on May 1, 2008. The payments are made annually with the first payment being due May 1, 2009. The annual interest rate is 12%. Using simple interest, the last adjusting entry was made on September 30.
7. Bea uses the aging of receivables method of recording bad debt. This year she expects that 10% of the receivables will be…