COMPREHENSIVE PROBLEM Western Sound Studios records and masters audio tapes of popular artists in live concerts. The performers use the tapes to prepare ‘‘live’’ albums, CDs, and MP3s. The following account balances were available at the beginning of 2009:

Accounts Payable $ 11,900 Accounts Receivable 384,000 Cash 16,300 Common Stock 165,000 Interest Payable 11,200 Long-Term Notes Payable 100,000 Rent Payable, Building 4,000 Rent Payable, Recording Equipment 7,000 Retained Earnings, 12/31/2008 101,200 During 2009, the following transactions occurred (the events described below are aggregations of many individual events):

a. Taping services in the amount of $994,000 were billed.

b. The accounts receivable at the beginning of the year were collected.

c. In addition, cash for $983,000 of the services billed in transaction a was collected.

d. The rent payable for the building was paid. In addition, $48,000 of building rental costs was paid in cash. There was no rent payable or prepaid at year-end.

e. The equipment rent payable on January 1 was paid. In addition, $84,000 of equipment rental costs was paid in cash. There was no rent payable or prepaid at year-end.

f. Utilities expense of $56,000 was incurred and paid in 2009.

g. Salaries expense for the year was $702,000. All $702,000 was paid in 2009.

h. The interest payable at January 1 was paid. During the year, an additional $11,000 of interest was paid. At year-end no interest was payable.

i. Income taxes for 2009 in the amount of $19,700 were incurred and paid.

Required:

. Establish a ledger for the accounts listed above and enter the beginning balances.

Use a chart of accounts to order the ledger accounts.

. Analyze each transaction. Journalize as appropriate. (Ignore the date since these events are aggregations of individual events.)

. Post your journal entries to the ledger accounts. Add additional ledger accounts when needed.

. Use the ending balances in the ledger accounts to prepare a trial balance.
Problem Set B