The following is the unadjusted trial balance for Rocky Mountain Resort Inc. at its year end, August 31, 2015. The company adjusts its accounts annually.

Additional information:
1. The one-year insurance policy was purchased on May 31 for $12,720.
2. A count of supplies on August 31 shows $1,380 of supplies on hand.
3. The buildings have an estimated useful life of 50 years.
4. The furniture has an estimated useful life of 10 years.
5. Customers must pay a $200 deposit if they want to book a cottage during the peak period. An analysis of these bookings indicates 355 deposits were received and credited to Unearned Revenue. Only 45 of these deposits have not been earned by August 31.
6. Salaries of $1,680 were unpaid at August 31.
7. The August utility bill of $3,120 has not yet been recorded or paid.
8. On August 25, a local business contracted with Rocky Mountain to rent one of the cottages for six months, starting October 1, at a rate of $3,000 per month. An advance payment equal to two months' (October and November) rent was received on August 31 and credited to Rent Revenue.
9. The mortgage interest rate is 7%. Interest has been paid to August 1; the next payment is due September 1.
10. Income tax payable is estimated to be $2,000.
11. During the month of May, $5,000 of common shares were issued.
Instructions
(a) Prepare T accounts, and enter the trial balance amounts.
(b) Prepare and post the adjusting journal entries for the year.
(c) Prepare an adjusted trial balance at August 31.
(d) Prepare (1) an income statement, (2) a statement of changes in equity, and (3) a statement of financial position.
(e) A friend of yours is considering investing in the company and asks you to comment on the results of operations and financial position. Is the company performing well or not? Does the financial position look healthy or weak? Use specific information from the financial statements to support your answer.

Transcribed Image Text:

Credit 38,820 Accumulated depreciation-buildings Accumulated depreciation-furniture Unearned revenue Mortgage payable, due 2019 7 earnings 306,000 Repairs and maintenance expense Interest expense Income tax expense $922,880 $922,880