Prepare transaction and adjusting entries. P4.4B (LO 2, 3) The following independent events for Repertory Theatre Ltd. during the year ended December 31, 2021, require a transaction journal entry or an adjusting journal entry, or both. The company adjusts its accounts annually. 1. Supplies on hand amounted to $1,500 at the beginning of the year. On March 1, additional supplies were purchased for $4,250 cash. At the end of the year, a physical count showed that supplies on hand amounted to $1,000. 2. The theatre owns a vehicle that was purchased on January 2, 2021, for $120,000. The vehicle's estimated useful life is four years. 3. The theatre has nine plays each season, which starts in September 2021 and ends in May 2022 (one play per month). Season tickets sell for $360. On August 2, 600 season tickets were sold for the upcoming 2021-2022 season. The theatre credited Deferred Revenue for the full amount received on August 2 and uses a Ticket Revenue account to record revenue earned from season tickets. 4. On June 1, the theatre borrowed $30,000 from La Caisse Populaire Desjardins at an interest rate of 6%, to be repaid in one year. The interest is payable on the first day of each following month, and was last paid on December 1. 5. The total biweekly payroll is $9,000, paid every other Friday for employee salaries earned during the prior 12-day workweek (Saturday to Thursday). This year, December 31 falls on a Friday. Salaries were last paid and recorded) on Friday, December 24, and will be paid next on Friday, January 7. 6. Repertory Theatre rents a portion of its facilities for $600 a month to a local seniors' choir that uses the space for rehearsals. The choir's treasurer was ill during December, and on January 7, the theatre received a $1,200 cheque for both the amount owing for the month of December and the rent for the month of January. 7. Upon reviewing its books on December 31, the theatre noted that a telephone bill for the month of December had not yet been received. A call to Bell Aliant determined that the telephone bill was for $1,125. The bill was paid on January 11. (Hint: Use the Utilities Expense account for telephone services.) Instructions a. Prepare the journal entries to record the original transactions for items 1, 2, 3, and 4. b. Prepare the year-end adjusting entries required for items 1 through 7 on December 31. c. Record the subsequent cash transactions in January for (1) the interest paid on January 1 (item 4), (2) payment of the payroll on January 7 (item 5), (3) receipt of the rent on January 7 (item 6), and (4) payment of the telephone bill on January 11 (item 7)
