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, 2015, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2015, but not for December.)

Marvelous Music Unadjusted Trial balance 31-Dec-15

Cash $ 15,800

Accounts receivable 2,100

Sheet Music supplies 450

Prepaid rent 6,000

Unexpired insurance 3,200

Music Equipment 180,000

equipment $ 72,000

Accounts payable 3,500

Interest payable 25

Notes payable 5,000

Income taxes payable 3,400

Dividends Payable 1,000

Unearned lesson revenue 1,100

Capital stock 20,000

Retained earnings 56,600

Dividends 1,000

Lesson revenue earned 154,375

Advertising expense 7,400

Depreciation expense:

Office equipment 3 3,000

Rent expense 16,500

Insurance expense 4,400

Sheet Music supplies expense 780

Uitilities expense 5,000

Salaries expense 27,500

Interest Expense 25

Income Taxes Expense 13,845

Totals $ 317,000 $ 317,000

Other Data 1.Accrued but unrecorded lesson revenue earned as of December 31, 2015, 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, 2015, for $4,800.

4.On October 1, 2015, the company paid $9,000 for rent through March 31, 2016.

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, 2015, 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, 2016.

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 2016.

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 companys 2015 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, 2015, have these dividends been paid? Explain