Question 5

Pavle James owner of Wollongong Dance Studio, employed you to prepare yearly financial statements for the year ended 30 June 2021. At year end, the unadjusted account balances of Wollongong Dance Studio are as follows:

Wollongong Dance Studio Trial Balance as at 30 June 2021
	Debit	Credit
Cash at Bank	$100,000
Account Receivable	75,000
Prepaid Advertising	30,000
Supplies	14,000
Training Equipment	250,000
Mortgage Payable		$105,000
Unearned Revenue		20,000
Loan Payable		50,000
Salaries Expense	70,000
Service Revenue		268,000
P. James, Capital		96,000
TOTAL	$539,000	$539,000

Additional information:

1. Prepaid advertising represents a one-year premium paid on 1 March 2021.
2. Supplies on hand at the end of the year amounted to 3,800.
3. Training Equipment is expected to last 7 years and with no residual value. It was purchased on 1 May 2021.
4. Accrued salaries at 30 June were $10,000.
5. The amount of revenue received in advance that remains unearned at 30 June is $3,800.

Required:

a) Record the necessary adjusting entries in the general journal. Include narrations. (12 marks)

b) Discuss the amount Wollongong Dance Studio needs to record on their Statement of Financial Position for the following accounts as at 31 June 2021:

i. Prepaid Advertising (1 mark)

ii. Salaries Expense (1 mark)

iii. Accumulated Depreciation (1 mark)

answer templates

part a)

Wollongong Dance Studio General Journal
	Particulars	Dr	Cr