Acc201 Financial Accounting: Comprehensive Problem - Bea’s Bed and Breakfast opened for business

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 76,890
Accounts Receivable 14,625
Allowance for Uncollectible Accounts 890
Prepaid Insurance 3,600 
Supplies 1,580 
Land 92,000
Building 188,000 
Furniture 24,600
Accumulated Depreciation- Building 
Accumulated Depreciation- Furniture 
Accounts Payable 8,900
Wages Payable 1,800
Unearned Revenue 5,400
Mortgage Payable 240,000
Bea’s Capital 81,305
Room Revenues 128,150
Restaurant Sales 29,250
Food and Beverage Purchases 12,400
Salaries Expense 48,000
Utilities Expense 17,000
Repairs and maintenance Expense 3,200 
Advertising Expense 1,800 
Interest expense 12,000 
495,695 495,695

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 uncollectible.
Instructions: 
1. Journalize the adjusting entries as of December 31. 
2. Prepare an adjusted trial balance at December 31. 
3. Prepare closing entries. 
4. Prepare an income statement, statement of owner’s equity, and a classified balance sheet as of December 31.
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