[tismarie]

I am preparing my retained earnings statement for the following question. I would like to know am I'm heading in the right direction?

The Olathe Hotel opened for business on May 1, 2010. Here is its trial balance before adjustment on May 31.


OLATHE HOTEL
Trial Balance
May 31, 2010

Debit Credit
Cash $2,500
Prepaid Insurance 1,800
Supplies 2,600
Land 15,000
Lodge 70,000
Furniture 16,800
Accounts Payable $4,700
Unearned Rent Revenue 3,300
Mortgage Payable 36,000
Common Stock 60,000
Rent Revenue 9,000
Salaries Expense 3,000
Utilities Expense 800
Advertising Expense
500




$113,000

$113,000

Other data:

1. Insurance expires at the rate of $300 per month.
2. A count of supplies shows $1,050 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture.
4. The mortgage interest rate is 7%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2,500 has been earned.
6. Salaries of $750 are accrued and unpaid at May 31.

After doing my t-accounts and adjusting trail balance the balance is $122870 now when doing my income statement it is (3800) which is negative correct? So if this is negative then is my retained earnings negative as well?

[pready]

I think you may have an error after your adjusted trial balance. Your debits and credits should equal 114,510

Your retained earnings should be 210.

Your adjustments should be as follows:
1. Your accounts should be Insurance Expense and Prepaid Insurance. The amount is given.

2. Your accounts should be Supplies Expense and Supplies. You have to calculate the amount, which is the difference between your Supplies account balance and the physical count of supplies onhand.

3. Your accounts should be Depreciation Expense and Accumulated Depreciation. The amount you have to calculate. Take your two amounts and divide them by 12 to get your monthly rate, then add the two amounts together.

4. Your accounts should be Interest Expense and Interest Payable. The amount has to be calculated. Take the amount in the Mortgage Payable and times it by 7%, then divide this number by 12 to get your monthly amount.

5. Your accounts should be Unearned Rent and Rent Revenue. The amount is given.

6. Your accounts should be Salaries Expense and Salaries Payable. The amount is given.