Morgan Dance Inc. provides ballet, tap, and jazz dancing instruction to promising young dancers. Morgan began operations in January 2012 and is preparing its monthly financial statements. The following items describe Morgan’s transactions in January 2012:
a. Morgan requires that dance instruction be paid in advance—either monthly or quarterly. On January 1, Morgan received $3,275 for dance instruction to be provided during 2012.
b. On January 31, Morgan noted that $450 of dance instruction revenue is still unearned.
c. On January 20, Morgan’s hourly employees were paid $1,350 for work performed in January.
d. Morgan’s insurance policy requires semi-annual premium payments. Morgan paid the $4,500 insurance policy which covered the first half of 2012 in December 2011.
e. When there are no scheduled dance classes, Morgan rents its dance studio for birthday parties for $100 per two-hour party. Three birthday parties were held during January. Morgan will not bill the parents until February.
f. Morgan purchased $250 of office supplies on January 10.
g. On January 31, Morgan determined that office supplies of $75 were unused.
h. MorganreceivedaJanuaryutilitybillfor$685.ThebillwillnotbepaiduntilitisdueinFebruary.
Required:
1. Identify whether each entry is an adjusting entry or a regular journal entry. If the entry is an adjusting entry, identify it as an accrued revenue, accrued expense, deferred revenue, or deferred expense.
2. Prepare the entries necessary to record the transactions above and on the previous page.