Marvelous Music provides music lessons to student musicians. Some students pay in advance for lessons; others are billed after lessons have been provided. Advance payments are credited to an account entitled Unearned Lesson Revenue. Adjusting entries are performed on a monthly basis.

An unadjusted trial balance dated December 31, 2011, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2011, but not for December.)

Other Data
1. Accrued but unrecorded lesson revenue earned as of December 31, 2011, amounts to $3,200.

2. Records show that $800 of cash receipts originally recorded as unearned lesson revenue had been earned as of December 31.

3. The company purchased a 12-month insurance policy on August 1, 2011, for $4,800.

4. On October 1, 2011, the company paid $9,000 for rent through March 31, 2012.
5. Sheet music supplies on hand at December 31 amount to $200.

6. All music equipment was purchased when the business was first formed. Its estimated life at that time was five years (or 60 months).

7. On November 1, 2011, the company borrowed $5,000 by signing a three-month, 6 percent note payable. The entire note, plus three months’ accrued interest, is due on February 1, 2012.

8. Accrued but unrecorded salaries at December 31 amount to $3,500.

9. Estimated income taxes expense for the entire year totals $22,000. Taxes are due in the first quarter of 2012.

Instructions

a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation).

b. Determine that amount at which each of the following accounts will be reported in the company’s 2011 income statement:

1. Lesson Revenue Earned

2. Advertising Expense

3. Insurance Expense

4. Rent Expense

5. Sheet Music Supplies Expense

6. Utilities Expense

7. Depreciation Expense: Music Equipment

8. Interest Expense

9. Salaries Expense

10. Income Taxes Expense 

c. The unadjusted trial balance reports dividends of $1,000. As of December 31, 2011, have these dividends been paid? Explain.

Transcribed Image Text:

MARVELOUS MUSIC UNADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Cash Accounts receivable Unexpired insurance. Prepaid rent Sheet music supplies.. Music equipment. Accumulated depreciation: music equipment. Accounts payable 15,800 2,100 3,200 6,000 450 .180,000 . . . Dividends payable Interest payable Income taxes payable Unearned lesson revenue Capital stock.. $ 72,000 3,500 5,000 1,000 25 3,400 1,100 20,000 56,600 Dividends Lesson revenue earned Advertising expense Insurance expense Rent expense Sheet music supplies expense Utilities expense Depreciation expense: music equipment Salaries expense Interest expense.···· Income taxes expense 1,000 154,375 7,400 4,400 16,500 780 5,000 33,000 27,500 25 13,845 _ $317,000 $317,000