Accounting policies

b.Accounting cycle: The business adopts a monthly accounting cycle.

c.Revenue recognition: The business recognizes revenue when dance lessons are provided to customers. Any revenue received in advance is recorded as a liability.

d.Sales tax: Celia has advised you to ignore the effect of sales tax. [ASIDE: This is an assumption to make the practice set easier for you to complete. In the real world, sales tax cannot be ignored.]

e.Prepayments: The business has a policy of recording prepayments, including office supplies, as assets. At the end of the month, adjustments are made to the relevant accounts to recognize the expense incurred during the accounting period.

f.Property, plant and equipment: Property, plant and equipment items are depreciated over their estimated useful life using the straight line method to calculate the depreciation charge. Depreciation is allocated on a monthly basis.

g.Long-term liabilities: The business obtained an interest only loan of $198,000 from BitiBank on June 1, 2017 at a simple interest rate of 6% per year. The first interest payment is due at the end of August 2017 and the principal on the loan is due on June 1, 2021.

h.Withdrawals: Withdrawals from the business by Celia Davisson are recorded using the Withdrawals account.

Accounting procedures

Boogie Wonderland adopts a manual accounting system and uses the general journal for the recording of individual transactions. These transactions are journalized at the end of the month with the date of each entry being the actual transaction date.

After all transactions have been recorded in the general journal, the next step is to post transactions from the general journal to the general ledger with the posting date being the date when each of these transactions occurred.

Adjusting entries information

Using the following information, you will record end of month adjustments:

Dance Equipment owned by the business: original purchase price was $56,000, estimated useful life was 10 years, and estimated residual value was $8,900 at the end of the useful life. Depreciation is calculated on a monthly basis using the straight line method. The monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year.

A number of dance lessons totalling $3,200 were provided during the month of June for Starmax Media but not yet invoiced.

The estimated telephone bill payable as at the end of June is $90.

Instructors work every single day during the week including weekends and are paid on a periodic basis. Wages were last paid up to and including June 16. Wages incurred after that day (from June 17 to June 30 inclusive) are estimated to have been $580 per day.

Interest expense incurred during the month of June but not yet paid to BitiBank for the bank loan is $990.

Provided $4,020 worth of dance lessons during the month of June in relation to the cash received in advance from LMP Media on June 9.

Office supplies totaling $1,170 are still on hand at June 30.

$3,520 of worth prepaid rent expired during the month of June.

General ledger instructions:

Some ledger accounts may have blank rows left at the end of the web page.

Each line of a transaction entered into the general journal must be posted as a single line to the corresponding general ledger account. When posting, you must not combine two or more entries in the general journal and post them as a single line of entry into the general ledger. Instead, you must post each line entered into the general journal separately.

When posting a transaction to a ledger account, under the Description column, please type the description of the transaction directly into the field. The exact wording does not matter for grading purposes. For example, it does not matter in an electricity transaction if you type 'Paid for electricity' or 'Paid electricity bill'.

For each ledger, under the Ref. column, you need to select the correct journal from a list in the drop-down box provided, in order to receive full points.

If the balance of a ledger account is zero you do not need to select a debit or credit from the drop-down box.

Adjusting entries

Now that you have completed the unadjusted trial balance, you are ready to record the end of month adjustments for June.

The purpose of adjusting entries is to ensure that the general ledger account balances reflect the revenues earned and expenses incurred during the accounting period.

Remember that the details of the end of month adjustments for June are as follows:

Dance Equipment owned by the business: original purchase price was $56,000, estimated useful life was 10 years, and estimated residual value was $8,900 at the end of the useful life. Depreciation is calculated on a monthly basis using the straight line method. The monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year.

A number of dance lessons totalling $3,200 were provided during the month of June for Starmax Media but not yet invoiced.

The estimated telephone bill payable as at the end of June is $90.

Instructors work every single day during the week including weekends and are paid on a periodic basis. Wages were last paid up to and including June 16. Wages incurred after that day (from June 17 to June 30 inclusive) are estimated to have been $580 per day.

Interest expense incurred during the month of June but not yet paid to BitiBank for the bank loan is $990.

Provided $4,020 worth of dance lessons during the month of June in relation to the cash received in advance from LMP Media on June 9.

Office supplies totaling $1,170 are still on hand at June 30.

$3,520 of worth prepaid rent expired during the month of June.

Instructions for adjusting entries

1) Record the end of month adjusting entries in the general journal.

2) Post the adjusting entries from the general journal to the general ledger accounts.

3) Record the final adjusted balance of each ledger account in the Adjusted Balance row of each ledger, even for ledgers with a balance of zero. Although each ledger already has a running balance, the Adjusted Balance row must still be filled out in order to receive full points.

Remember:

Enter all answers to the nearest whole dollar.

You are also required to apply the journal and ledger instructions provided above

GENERAL LEDGER PRE ADJUSTING Account: Cash Account No. 100 Date Description Ref Debit Credit 99,000 Jun 1 Capital contributed by Celia Davisson Jun 1 Purchase of equipment 56,000 GJ 198.000 Jun 1 Received cash loan 10,560 Jun 1 Prepaid rent Jun 4 Service revenue 4,400 Jun 6 Paid telephone expense 210 Jun 9 Revenue received in advance 6.700 Jun 17 Paid staff wages 6.300 Jun 18 Collection of accounts receivable 2.200 Jun 21 Cash withdrawal by Celia Davisson 2,000 Jun 26 Paid office supplies 1.800 Jun 26 Service revenue 2.800 Jun 30 Unadjusted Balance Account: Accounts Receivable Account No. 110 Date Description Ref Debit Credit 5,900 Jun Service revenue GJ Jun 18 Collection of accounts receivable GJ 2.200 Jun 25 Service revenue GJ 6.100 Jun 30 Unadjusted Balance Balance 99,000 DR 43,000 DR 241,000 DR 230,440 DR 234,840 DR 234,630 DR 241,330 DR 235,030 DR 237,230 DR 235,230 DR 233,430 DR 236,230 DR 236,230 DR Balance 5,900 DR 3,700 DR 9,800 DR 9,800 DR