Question
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
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.)
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MARVELOUS MUSIC UNADJUSTED TRIAL BALANCE DECEMBER 31, CURRENT YEAR
Cash$15,800 Accounts receivable2,100 Unexpired insurance3,200 Prepaid rent6,000 Sheet music supplies450 Music equipment180,000 Accumulated depreciation: music equipment$72,000 Accounts payable3,500 Notes payable5,000 Dividends payable1,000 Interest payable25 Income taxes payable3,400 Unearned lesson revenue1,100 Capital stock20,000 Retained earnings56,600 Dividends1,000 Lesson revenue earned154,375 Advertising expense7,400 Insurance expense4,400 Rent expense16,500 Sheet music supplies expense780 Utilities expense5,000 Depreciation expense: music equipment33,000 Salaries expense27,500 Interest expense25 Income taxes expense13,845 $317,000$317,000 Other Data
Accrued but unrecorded lesson revenue earned as of December 31 of the current year amounts to $3,200.
Records show that $800 of cash receipts originally recorded as unearned lesson revenue had been earned as of December 31.
The company purchased a 12-month insurance policy on August 1 of the current year for $4,800.
On October 1 of the current year the company paid $9,000 for rent through March 31 of the upcoming year.
Sheet music supplies on hand at December 31 amount to $200.
All music equipment was purchased when the business was first formed. Its estimated life at that time was five years (or 60 months).
On November 1 of the current year the company borrowed $5,000 by signing a 3-month, 6 percent note payable. The entire note, plus three months accrued interest, is due on February 1 of the upcoming year.
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
For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation).
Determine that amount at which each of the following accounts will be reported in the companys income statement for the current year.
Lesson Revenue Earned
Advertising Expense
Insurance Expense
Rent Expense
Sheet Music Supplies Expense
Utilities Expense
Depreciation Expense: Music Equipment
Interest Expense
Salaries Expense
Income Taxes Expense
The unadjusted trial balance reports dividends of $1,000. As of December 31, have these dividends been paid? Explain.
MARVELOUS MUSIC UNADJUSTED TRIAL BALANCE DECEMBER 31, CURRENT YEAR Cash Accounts receivable Unexpired insurance Prepaid rent Sheet music supplies Music equipment. Accumulated depreciation: music equipment Accounts payable Notes payable Dividends payable Interest payable Income taxes payable Unearned lesson revenue. Capital stock Retained earnings $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 Dividends 1,000 MARVELOUS MUSIC UNADJUSTED TRIAL BALANCE DECEMBER 31, CURRENT YEAR Cash Accounts receivable Unexpired insurance Prepaid rent Sheet music supplies Music equipment. Accumulated depreciation: music equipment Accounts payable Notes payable Dividends payable Interest payable Income taxes payable Unearned lesson revenue. Capital stock Retained earnings $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 Dividends 1,000Step by Step Solution
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