Question
Super Fit Fitness Centre, a company provides group fitness courses and individual training packages to customers (the Company). Customers pay in advance for individual training
Super Fit Fitness Centre, a company provides group fitness courses and individual training packages to customers ("the Company"). Customers pay in advance for individual training packages; others are billed after attending the fitness courses. The company adjusts its accounts monthly and prepares closing entries annually on 31 December. Below is its unadjusted trial balance on 31 December 2019. Account Title Cash Course fees receivable Debit ($) Credit ($) 157,000 9,000 Prepaid insurance Supplies Fitness equipment Interest payable 2,400 3,300 216,000 Accumulated depreciation: Fitness equipment Income tax payable Unearned individual training fees 6% Notes payable Share capital ($3 per share) 54,000 2,000 25,500 16,500 80,000 75,000 Retained earnings 97,000 Courses fees earned 253,500 Individual training fees earned 169,300 Rent expense 160,000 Salary expense 135,000 Repairing expense 10,000 Insurance expense 12,000 Interest expense 5,000 Depreciation expense: Fitness equipment 39,600 Supplies expense 21,000 Income tax expense 2,500 772,800 772,800 Information on adjusting entries: (1) Supplies on hand on 31 December 2019 were $500. (2) Accrued but unrecorded and uncollected course fees earned at 31 December 2019 amounted to $5,700. (3) The 6% 6-month note payable was made on 1 July 2019. The entire note plus all the accrued interest was due and paid on 31 December 2019. No entries were recorded for December's adjustment and repayment transactions. (4) The Company paid a full year insurance started on 1 January 2019. No adjusting entries have been made since 1 November 2019. (5) One of the shareholders of the Company sold all his 1,000 shares at $50 per share to his friend on 31 December 2019. (6) Fitness equipment was depreciated by straight-line method over an estimated useful life of 5 years with no residual value. (7) Nancy paid in advance for individual training packages of $5,000 in October 2019 had completed the training in December 2019. (8) On 31 December 2019, the Company received payment of $15,000 from Scott for individual training packages that will start in January 2020. No entries were made. (9) There was an unrecorded and unpaid salary of $5,500 earned by a trainer for December 2019. (10) On 31 December 2019, the Company declared a dividend of $0.5 per share and 80% was paid on the same day. The remaining balance will be paid on 1 February 2020. No entries were recorded. Required: (a) Prepare the necessary adjusting journal entries on 31 December 2019 so as to bring the financial records of the Company up-to-date. Use the account titles given in the Trial Balance where appropriate. Show your workings. Explanations are NOT required. If no adjusting entries are required, state "No entry" and name the accounting principle applied. (46 marks)
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