Mountain Best Lodge has a May 31 fi scal year end and prepares adjusting entries on a monthly basis. The following trial balance was prepared before recording the May 31 month-end adjustments:

Additional information:

1. The company pays $5,280 for its annual insurance policy on November 30 of each year.

2. A count of supplies on May 31 shows $760 of supplies on hand.

3. The building was purchased on June 1, 2004, and has an estimated useful life of 40 years.

4. The furniture was purchased on June 1, 2018, and has an estimated useful life of fi ve years.

5. Customers must pay a $50 deposit if they want to book a room in advance during peak times.

An analysis of these bookings indicates that 170 deposits were received (all credited to Unearned Revenue) and 40 of the bookings have been provided by May 31, 2021.

6. The mortgage interest rate is 5.5% per year. Interest has been paid to May 1, 2021. The next payment is due on June 1.

7. Salaries accrued to the end of May were $1,025.

8. The May utility bill of $1,250 is unrecorded and unpaid.

9. On May 31, Mountain Best Lodge determined it is owed $950 from customers who are currently using the rooms but will not pay the amount owing until they check out in June. This amount is in addition to any deposits referred to in item 5 above.

Instructions

a. Prepare T accounts and enter the unadjusted trial balance amounts.

b. Prepare and post the monthly adjusting journal entries on May 31.

c. Prepare an adjusted trial balance at May 31.

d. Prepare an income statement and a statement of owner?s equity for the year ended May 31, and a balance sheet as at May 31, 2021.

Is the owner?s capital account on the May 31, 2021, adjusted trial balance the same amount as shown in the May 31, 2021, balance sheet? Why or why not?

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MOUNTAIN BEST LODGE Trial Balance May 31, 2021 Debit Credit Cash $ 12,365 Prepaid insurance Supplies 3,080 1,050 Land 80,000 180,000 Building Accumulated depreciation-building Furniture $ 76,125 21,000 Accumulated depreciation-furniture Accounts payable Unearned revenue 12,250 4,780 8,500 Mortgage payable M. Rundle, capital 146,400 54,800 M. Rundle, drawings 18,750 Service revenue Advertising expense Depreciation expense Salaries expense Supplies expense Interest expense Insurance expense Utilities expense 102,100 500 7,975 49,304 5,410 7,381 4,840 13,300 $404,955 $404,955