Question

Question: Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.

CRESTWOOD GOLF CLUB, INC. TRIAL BALANCE DECEMBER 31
	Debit	Credit
Cash	\(15,000
Accounts receivables	13,000
Allowance for doubtful accounts		\)1,100
Prepaid insurance	9,000
Land	350,000
Building	120,000
Accumulated depreciation – building		38,400
Equipment	150,000
Accumulated depreciation – equipment		70,000
Common stock		400,000
Retained earnings		82,000
Dues revenue		200,000
Green fees revenue		5,900
Rent revenue		17,600
Utilities expenses	54,000
Salaries and wages expenses	80,000
Maintenance and repair expenses	24,000
	\(815,000	\)815,000

Instructions

(a) Enter the balances in ledger accounts. Allow five lines for each account.

(b) From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.)

(1) The buildings have an estimated life of 30 years with no salvage value (straight-line method).

(2) The equipment is depreciated at 10% per year.

(3) Insurance expired during the year \(3,500.

(4) The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received.

(5) It is estimated that 12% of the accounts receivable will be uncollectible.

(6) Salaries and wages earned but not paid by December 31, \)3,600.

(7) Dues received in advance from members $8,900 were recorded as Dues Revenue.

(c) Prepare an adjusted trial balance.

(d) Prepare closing entries and post.

Short answer

Answer

1. Balance of assets and expenses are reported on the debit side, and balance of liabilities and revenue is reported on the credit side of the ledger.
2. Both sides of the adjusting journal total$37,060.
3. Both sides of the adjusted trial balance total$839,660.
4. Net income of the business entity is$31,640.

Step-by-step solution

Definition of Adjusting Entries

Adjusting entries can be defined as the entries that are made at year-end to adjust and update the balance of some of the general ledger accounts. These entries are done when the business entity uses the accrual basis of accounting.

Ledger accounts

Cash
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$15,000

Accounts receivable
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$13,000

Allowance for doubtful accounts
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$1,100

Prepaid insurance
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	9,000

Land
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$350,000

Building
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$120,000

Accumulated depreciation - Building
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$38,400

Equipment
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$150,000

Accumulated depreciation - Equipment
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$70,000

Common stock
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$400,000

Retained earnings
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$82,000

Dues revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$200,000

Green fees revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$5,900

Rent revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$17,600

Utilities expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$54,000

Salaries and wages expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$80,000

Maintenance and repair expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$24,000

Adjusting journal entries and posting them into the ledger

Date	Accounts and Explanation	Debit ($)	Credit ($)
31 Dec	Depreciation expenses	4,000
	Accumulated depreciation - building		4,000
31 Dec	Depreciation expenses	15,000
	Accumulated depreciation – equipment		15,000
31 Dec	Insurance expenses	3,500
	Prepaid insurance		3,500
31 Dec	Rent receivable $\left(\frac{\$17,600}{11}\right)$	1,600
	Rent revenue		1,600
31 Dec	Bad debt expenses$\left(\left(\$13,000\times 12\%\right)-\$1,100\right)$	460
	Allowance for doubtful accounts		460
31 Dec	Salaries and wages expenses	3,600
	Salaries and wages payable		3,600
31 Dec	Dues revenue	8,900
	Unearned dues revenue		8,900
		$37,060	$37,060

Cash
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$15,000
31 Dec	Balance	$15,000

Accounts receivable
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$13,000
31 Dec	Balance	$13,000

Allowance for doubtful accounts
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$1,100
			31 Dec	Bad debt expenses	$460
			31 Dec	Balance	$1,560

Bad debt expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Allowance for doubtful accounts	$460
31 Dec	Balance	$460

Prepaid insurance
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$9,000	31 Dec	Insurance expenses	$3,500
31 Dec	Balance	$5,500

Insurance expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Prepaid insurance	$3,500
31 Dec	Balance	$3,500

Land
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$350,000
31 Dec	Balance	$350,000

Building
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$120,000
31 Dec	Balance	$120,000

Accumulated depreciation - Building
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$38,400
			31 Dec	Depreciation expenses	4,000
			31 Dec	Balance	$42,400

Equipment
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$150,000
31 Dec	Balance	$150,000

Accumulated depreciation - Equipment
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$70,000
			31 Dec	Depreciation expenses	15,000
			31 Dec	Balance	$85,000

Depreciation expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Accumulated depreciation – building	$4,000
31 Dec	Accumulated depreciation - equipment	$15,000
31 Dec	Balance	$19,000

Common stock
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$400,000
			31 Dec	Balance	$400,000

Retained earnings
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$82,000
			31 Dec	Balance	$82,000

Dues revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Unearned dues revenue	$8,900	31 Dec	Balance	$200,000
			31 Dec	Balance	$191,100

Unearned dues revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Dues revenue	$8,900
			31 Dec	Balance	$8,900

Green fees revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$5,900
			31 Dec	Balance	$5,900

Rent revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$17,600
			31 Dec	Rent receivable	1,600
			31 Dec	Balance	$19,200

Revenue receivable
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Rent revenue	$1,600
31 Dec	Balance	$1,600

Utilities expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$54,000
31 Dec	Balance	$54,000

Salaries and wages expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$80,000
31 Dec	Salaries and wages payable	$3,600
31 Dec	Balance	$83,600

Salaries and wages payable
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Salaries and wages payable	$3,600
			31 Dec	Balance	$3,600

Maintenance and repair expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$24,000
31 Dec	Balance	$24,000

Working note:

1. Depreciation of building:

$$\begin{gathered} \mathit{D}\mathit{e}\mathit{p}\mathit{r}\mathit{e}\mathit{c}\mathit{i}\mathit{a}\mathit{t}\mathit{i}\mathit{o}\mathit{n}\mathbf{=}\frac{\mathbf{C}\mathbf{o}\mathbf{s}\mathbf{t}}{\mathbf{U}\mathbf{s}\mathbf{e}\mathbf{f}\mathbf{u}\mathbf{l}\mathbf{l}\mathbf{i}\mathbf{f}\mathbf{e}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{120}\mathbf{,}\mathbf{000}}{\mathbf{30}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{000} \end{gathered}$$

1. Depreciation of equipment:

$$\begin{gathered} \mathit{D}\mathit{e}\mathit{p}\mathit{r}\mathit{e}\mathit{c}\mathit{i}\mathit{a}\mathit{t}\mathit{i}\mathit{o}\mathit{n}\mathbf{=}\mathit{C}\mathit{o}\mathit{s}\mathit{t}\mathbf{\times }\mathbf{10}\mathbf{\%} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{150}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{10}\mathbf{\%} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{15}\mathbf{,}\mathbf{000} \end{gathered}$$

Adjusted trial balance

CRESTWOOD GOLF CLUB, INC. TRIAL BALANCE DECEMBER 31
	Debit	Credit
Cash	$15,000
Accounts receivables	13,000
Allowance for doubtful accounts		$1,560
Prepaid insurance	5,500
Land	350,000
Building	120,000
Accumulated depreciation – building		$42,400
Equipment	$150,000
Accumulated depreciation – equipment		$85,000
Common stock		400,000
Insurance expenses	3,500
Retained earnings		82,000
Dues revenue		191,100
Green fees revenue		5,900
Rent revenue		19,200
Utilities expenses	54,000
Salaries and wages expenses	83,600
Maintenance and repair expenses	24,000
Unearned dues revenue		8,900
Salaries and wages payable		3,600
Revenue receivable	1,600
Bad debt expenses	460
Depreciation expenses	19,000
	$839,660	$839,660

Closing entries and posting

Date	Accounts and Explanation	Debit ($)	Credit ($)
31 Dec	Dues revenue	191,100
	Green fees revenue	5,900
	Rent revenue	19,200
	Income summary		216,200
31 Dec	Income summary	184,560
	Utilities expenses		54,000
	Bad debt expenses		460
	Salaries and wages expenses		83,600
	Maintenance and repair expenses		24,000
	Depreciation expenses		19,000
	Insurance expenses		3,500
31 Dec	Income summary	31,640
	Retained earnings		31,640
		$432,400	$432,400

Posting into ledger:

Cash
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$15,000
31 Dec	Balance	$15,000

Accounts receivable
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$13,000
31 Dec	Balance	$13,000

Allowance for doubtful accounts
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$1,100
			31 Dec	Bad debt expenses	$460
			31 Dec	Balance	$1,560

Bad debt expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Allowance for doubtful accounts	$460	31 Dec	Income summary	460
31 Dec	Balance	$0

Prepaid insurance
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$9,000	31 Dec	Insurance expenses	$3,500
31 Dec	Balance	$5,500

Insurance expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Prepaid insurance	$3,500	31 Dec	Income summary	3,500
31 Dec	Balance	$0

Land
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$350,000
31 Dec	Balance	$350,000

Building
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$120,000
31 Dec	Balance	$120,000

Accumulated depreciation - Building
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$38,400
			31 Dec	Depreciation expenses	4,000
			31 Dec	Balance	$42,400

Equipment
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$150,000
31 Dec	Balance	$150,000

Accumulated depreciation - Equipment
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$70,000
			31 Dec	Depreciation expenses	15,000
			31 Dec	Balance	$85,000

Depreciation expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Accumulated depreciation – building	$4,000	31 Dec	Income summary	$19,000
31 Dec	Accumulated depreciation - equipment	$15,000
31 Dec	Balance	$0

Common stock
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$400,000
			31 Dec	Balance	$400,000

Retained earnings
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Balance	$82,000
			31 Dec	Income summary	31,640
			31 Dec	Balance	$113,640

Dues revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Unearned dues revenue	$8,900	31 Dec	Balance	$200,000
31 Dec	Income summary	191,100
			31 Dec	Balance	$0

Unearned dues revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Dues revenue	$8,900
			31 Dec	Balance	$8,900

Green fees revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Income summary	$5,900	31 Dec	Balance	$5,900
			31 Dec	Balance	$0

Rent revenue
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Income summary	$19,200	31 Dec	Balance	$17,600
			31 Dec	Rent receivable	1,600
			31 Dec	Balance	$0

Revenue receivable
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Rent revenue	$1,600
31 Dec	Balance	$1,600

Utilities expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$54,000	31 Dec	Income summary	$54,000
31 Dec	Balance	$0

Salaries and wages expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$80,000	31 Dec	Income summary	$83,600
31 Dec	Salaries and wages payable	$3,600
31 Dec	Balance	$0

Salaries and wages payable
Date	Particulars	Amount $	Date	Particulars	Amount $
			31 Dec	Salaries and wages payable	$3,600
			31 Dec	Balance	$3,600

Maintenance and repair expenses
Date	Particulars	Amount $	Date	Particulars	Amount $
31 Dec	Balance	$24,000	31 Dec	Income Summary	$24,000
31 Dec	Balance	$0