10:58 101 PROBLEM 4.5B Preparing Adjusting Entries and 107 Determining Account Balancee LOG till ill 82% e. Assume the playhouse has been operating profitably all year. Although the September 30 trial balance shows substantial income taxes expense, income taxes payable is a much smaller amount. This relationship is quite normal throughout much of the year. Explain. 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.) MARVELOUS MUSIC UNADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Cash..... $ 15,800 Accounts receivable Unexpired insurance. Prepaid rent Sheet music supplies. Music equipment. Accounts payable. Notes payable. Dividends payable 2,100 3,200 6,000 450 180,000 Accumulated depreciation: music equipment. $ 72,000 3,500 5,000 1,000 Interest payable Income taxes payable. Uneamed lesson revenue. Capital stock. Retained earnings. Dividends. Lesson revenue earned 25 3,400 1,100 20,000 56,600 1,000 154,375 Advertising expense. 7,400 Insurance expense... Rent expense 16,500 Sheet music supplies expense. 780 Utilities expense 5,000 Depreciation expense: music equipment 33,000 Salaries expense. 27,500 Interest expense... Income taxes expense 25 13,845 $317,000 $317,000 184 101 PROBLEM 4.68 Preparing Adjusting Entries and 107 Determining Account Balances LOS Chapter 4 The Accounting Cycle: Accruals and Deferrals 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 59,000 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 com pany'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 e. The unadjusted trial balance reports dividends of $1,000. As of December 31, 2011, have these dividends been paid? Explain. Mate Ease is an Internet dating service. All members pay in advance to be listed in the database. Advance payments are credited to an account entitled Uneamed Member Dues. 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 Decemb 217 of 1265 |||