Question 2 (20 marks) (a) The president of Arts Centre was informed that the financial statements would be available as soon as the adjusting entries are made. Being a non-accountant, the president feels adjustments should not be necessary if the accounting department is operating in a competent manner. Does the need for adjusting entries at the end of the year imply that transactions are not being recorded properly? Explain (b) Splendid Club closes its accounts at the end of the calendar year. The manner in which the club has recorded several transactions occurring during 2019 is described as follows: (1) On 1 September, received advance payment from members enrolling for a three months fitness course to be started on September. The entire amount received was credited to "Course fee revenue account. (2) On 1 December, received advance payment from some members enrolling for another course to be started over the three-month period beginning 1 December This time, the entire amount received was credited to an unearned revenue account (3) On 15 December, made full payment for a one-year insurance policy that goes into effect on 2 January 2020. The cost of the policy was debited to Unexpired Insurance (4) Payroll expense is recorded when employees are paid, Payday for the last two weeks of December falls on 2 January 2020. Required: For each item above (except 1-which has been selected as a sample and its answer is provided at the end of this question), explain whether an adjusting entry is needed at 31 December 2019, and state the reason for your answer. If you recommend an adjusting entry, explain the effects your entry would have on assets, liabilities, equity. revenue and expenses in the 2019 financial statement. Answer for (1) sample: No adjusting entry is needed, because although the revenue was collected in advance on September 1, it has all been camed prior to year-end. Thus, inclusion of the entire amount in revenue of the period is correct