Please prepare all 10 journal entries with explanations as well as any adjusting entries as specified in the question.

Olivia's Music Studio (OMS) Olivia Lewis, a passionate pianist and teacher, has over 20 years of teaching experience. She started Olivia's Music Studio (OMS) on January 1, 2020. OMS, located in Toronto, ON, offers piano and music theory lessons and sells instrument accessories such as metronomes, adjustable benches, music stand lamps, and cleaning kits and tools. After what Olivia feels was a successful first year, she is eager to see how the company has performed. The company's year-end is December 31. She has asked you to create a set of financial statements, excluding the statement of cash flows, as she feels she has a good understanding of her cash spending as compared to her budget. Olivia will use these statements for her own use to assist with planning for the future of the company. Exhibit 1 includes an unadjusted trial balance at December 31, 2020. Exhibit 1 Olivia's Music Studio (OMS) Unadjusted Trial Balance, December 31, 2020 Credit CADS Account name Cash Accounts Receivable Supplies Inventory - Benches Inventory - Metronomes Inventory - Lamps Inventory - Cleaning Kits Prepaid Insurance Storefront Sign Furniture & Fixtures Computer Equipment Accounts Payable Contributed Capital Retained Earnings (January 1, 2020) Service Revenue Sales Revenue Cost of Sales Rent Expense Salaries Expense Marketing Expense Total Debit CAD$ 4,200 2,500 2,600 4,000 2,000 500 2,275 2,700 3,000 10,000 3,000 3,500 1,000 74,250 31,805 17,980 14,400 38,400 3,000 $110,555 $110,555 Required: 1. Prepare the journal entries for 2020, including any required year-end adjusting entries. Provide an explanation of why each entry is required and how it was calculated. The company prepares annual adjusting entries. Exhibit 2 Additional information 1. OMS uses a perpetual inventory system. A breakdown of inventory on hand at December 31, 2020: Inventory - Benches Inventory - Metronomes Inventory - Lamps Inventory - Cleaning kits Quantity Unit Cost 20 $200 40 $50 25 $20 $35 Total Cost Net Realizable Value $4,000 $3,800 $2,000 $2,250 $500 $550 $2,275 $2,150 65 2. The company ran out of a popular lamp. They placed an order for 30 of these lamps on account at a cost $20 each on December 28, 2020. Terms of this order were 2/10, n/30 FOB shipping point. They received an email notifying them of shipment on December 31, 2020. Olivia looked forward to replenishing this popular item and adding it to inventory upon receipt. 3. A count of supplies was also done on December 31, 2020 where $1,550 worth of supplies was found on hand. 4. An insurance policy was purchased in March 2020 for the next 12 months starting April 1, 2020. 5. Olivia was ecstatic when the custom storefront sign arrived on April 1; just in time to be put up before the store's official grand opening! She hopes that the sign will last for the next 15 years. Olivia sure had fun designing and setting up the store! The furniture and fixtures she invested in all of which was incurred within the first couple days of January) are expected to last for the next 10 years. Olivia wanted to ensure that she could monitor the store's operations and her teaching schedule. As such, she invested in both a laptop and tablet. Everything was purchased on January 1, 2020 when she took advantage of some Boxing Day sales prices. She expects that both the laptop and tablet would be valuable for the next 5 years where she would need to expect to upgrade. Straight-line method is used for all capital assets. 6. Olivia offers online piano and music theory lessons. Lessons are sold individually or in packages. An individual lesson sells for $100. Packages of 5 lessons sell for $450 and packages of 10 for $850. Customers must pay for the full amount before the lessons begin. All sales are done with cash and/or credit card and payment is assumed collectible upon sale. Cash received from the sales is deposited in the company's bank account at the end of each month. Bank reconciliations are prepared on an annual basis. There were 10 lesson packages sold in December, but the lessons will not take place until January 2021 due to the Christmas holidays. These were all 5-lesson packages and the customers paid in full and look forward to learning from Olivia. These lessons have been recognized as service revenue in December 2020, given it was the period in which cash was collected. 7. A customer bought a 5-lesson package in September, and the lessons occurred in both September and October. The customer promised to pay for the package on October 15, however they have yet to pay this amount owing and all methods of contacting them have been exhausted and the amount has been deemed uncollectible. This has Olivia worried that 10% of all her accounts receivable at the end of the year will not be collected. 8. The following information regarding payroll needs to be considered in preparing year-end financial statements (ignore payroll taxes): Employee Olivia Lewis Pay rate Annual 84,000 Pay frequency 15th of the month (for prior month) 9. OMS is subject to income tax and the tax rate is 30%. 10. Olivia hired a payroll clerk, who is a very hard worker and did not taken vacation in 2020. Employees do not typically report payroll errors, so Olivia does not need to monitor the payroll clerk closely