Question #1 (40 marks) Company A's business involves hosting several concerts per year. The company's year-end is December 31, 2021. The company records all prepaid costs as assets and all unearned revenues as liabilities and adjusts accounts annually. 1. Prepaid supplies amounted to $945 on December 31, 2020. On June 10, 2021, additional supplies were purchased for $1,955 cash. On December 31, 2021, a physical count showed that prepaid supplies on hand amounted to $840. 2. Purchased equipment on August 1, 2021, for $47,520 cash. The equipment was estimated to have a useful life of 12 years. The company's policy is to employ the straight-line method and depreciation is rounded to the nearest month. 3. The company puts on eight concerts each season. Season tickets sell for $450 cach and 220 sold in July for the upcoming 2021-2022 season, which begins in September 2021 and ends in April 2022 (one concert per month). The company credited Unearned Revenue for the full amount received 4. Every Wednesday, the total payroll is $4,740 for salaries earned during the previous workweek (Monday-Friday). Salaries were last paid on Wednesday, December 29. This year, December 31 falls on a Friday $. The company rents the theatre to a local children's choir, which uses the space for rehearsals twice a week at a rate of $785 per month. The choir was short of cash at the beginning of December and sent the company a cheque for $560 on December 10, and a promise to pay the balance in January. On January 10, 2022, the company received a cheque for the balance owing from December. At this time, the January rent was also paid. 6. On June 1, 2021, the theatre borrowed $27,600 from its bank at an annual interest rate of 5.0%. The principal and interest are to be repaid on May 30, 2022. 7. Upon reviewing its accounting records on December 31, 2021, the theatre noted that the in April 2022 (one concert per month). The company credited Unearned Revenue for the full amount received. 4. Every Wednesday, the total payroll is $4,740 for salaries eamed during the previous workweek (Monday-Friday). Salaries were last paid on Wednesday, December 29. This year, December 31 falls on a Friday. 5. The company rents the theatre to a local children's choir, which uses the space for rehearsals twice a week at a rate of $785 per month. The choir was short of cash at the beginning of December and sent the company a cheque for $560 on December 10, and a promise to pay the balance in January. On January 10, 2022, the company received a cheque for the balance owing from December. At this time, the January rent was also paid. 6. On June 1, 2021, the theatre borrowed $27,600 from its bank at an annual interest rate of 5.0%. The principal and interest are to be repaid on May 30, 2022. 7. Upon reviewing its accounting records on December 31, 2021, the theatre noted that the telephone bill for the month of December had not yet been received. A call to the phone company determined that the December telephone bill was $575. The bill was paid on January 12, 2021. a) Prepare the journal entries to record the 2021 transactions for items 1 through 6. b) Prepare the year-end adjusting entry for items 1 through 7
