MARVELOUS MUSIC UNADJUSTED TRIAL BALANCE DECEMBER 31. CURRENT YEAR Cash............................. Accounts receivable Unexpired insurance Prepaid rent........- Sheet music supplies Music equipment Accumulated depreciation: music equipmen Accounts payable . Notes payable Dividends payable Interest payable Income taxes payable Unearned lesson revenue Capital stock . Retained earnings Dividends. Lesson revenue earned Advertising expense... Insurance expense ... Rent expense Sheet music supplies expense Utilities expense . . . . . . . . . . Depreciation expense: music equi Salaries expense Interest expense. Income taxes expense $ 15.800 2,100 3.200 6.000 450 180.000 $ 72.000 3.500 5.000 1,000 25 3.400 1.100 20.000 56.600 1.000 154.375 7.400 4,400 16.500 780 5.000 33.000 27,500 25 13.845 $317.000 $317.000 Other Data 1. Accrued but unrecorded lesson revenue carned as of December 31 of the current year amounts to $3.200. 2. Records show that S800 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 I of the current year for $4.800. 4. On October 1 of the current year the company paid $9,000 for rent through March 31 of the upcoming year. S. 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 of the current year the company borrowed $5,000 by signing a 3-month, 6 per- cent note payable. The entire note. plus three months accrued interest, is due on February of the upcoming year. 8. Accrued but unrecorded salaries at December 31 amount to $3.500. %. Estimated income taxes expense for the entire year totals $22.000. Taxes are due in the first quarter of the upcoming year. 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 compa- ny's income statement for the current year. 1. Lesson Revenue Earned 2. Advertising Expense E 9. Salaries Expense 10. Income Taxes Expense The unadjusted trial balance reports dividends of $1,000. As of December 31, have these dividends been paid? Explain. L04-1, L04-2, L04-3, L04-4, L04-5, L04-6, L04-7, L04-9 PROBLEM 4.5B Preparing Adjusting Entries and Determining Account Balances 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. Below is an unadjusted trial balance dated December 31 of the current year. (Bear in mind that adjusting entries have already been made for the first 11 months, but not for December.)