Tammy Touchtone operates a talent agency called Touchtone Talent Agency. Some clients pay in advance for services; others are billed after services have been performed. Advance payments are credited to an account entitled Unearned Agency Fees. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December $31.$ An unadjusted trial balance dated December $31,$ current year, follows. $($Bear in mind that adjusting entries have already been made for the first $11$ months of the current year, but not for December.$)$

Page $244$

Table Summary: A three line unadjustment trial balance for Touchtone Talent Agency as of December $31,$ current year. A table with three columns and twenty$-$two rows.

TOUCHTONE TALENT AGENCY

UNADJUSTED TRIAL BALANCE

DECEMBER $31,$ CURRENT YEAR

Cash $$14,950$

Fees receivable $35,300$

Prepaid rent $1,200$

Prepaid insurance$375$

Office supplies $900$

Office equipment $15,000$

Accumulated depreciation: office equipment $$12,000$

Accounts payable $1,500$

Note payable $6,000$

Income taxes payable $3,200$

Unearned agency fees $8,000$

Capital stock $20,000$

Retained earnings $10,800$

Dividends $800$

Agency fees earned $46,500$

Telephone expense $480$

Office supply expense $1,130$

Depreciation expense: office equipment $2,750$

Rent expense $6,100$

Insurance expense $1,175$

Salaries expense $24,640$

Income taxes expense $3,200$

$$108,000$ $$108,000$

Other Data

Office equipment is being depreciated over $60$ months $($five years$).$

At December $31,$ current year, $$2,500$ of previously unearned agency fees had been earned.

Accrued but unrecorded and unpaid salary expense totals $$1,360$ at December $31,$ current year.

The agency pays rent quarterly $($every three months$).$ The most recent advance payment of $$1,800$ was made November $1,$ current year. The next payment of $$1,800$ will be made on February $1,$ next year.

Accrued but unrecorded and uncollected agency fees earned total $$3,000$ at December $31,$ current year.

Office supplies on hand at December $31,$ current year, total $$530.$

On September $1,$ current year, the agency purchased a six$-$month insurance policy for $$750.$

On December $1,$ current year, the agency borrowed $$6,000$ by signing a three month, $9$ percent note payable. The entire amount borrowed, plus interest, is due March $1,$ next year.

Accrued income taxes payable for the entire year ending December $31,$ current year, total $$3,900.$ The full amount is due early in the next year.

Instructions

Prepare the necessary adjusting journal entries on December $31,$ current year. Also prepare an adjusted trial balance dated December $31,$ current year.

From the adjusted trial balance prepared in part a$,$ prepare an income statement and statement of retained earnings for the year ended December $31,$ current year. Also prepare the company$$s balance sheet dated December $31,$ current year.

Prepare the necessary year$-$end closing entries.

Prepare an after$-$closing trial balance.

Page $245$

Assume that the agency purchased all of its office equipment when it first began business activities. For how many months has the agency been in operation?

Has the agency$$s monthly office rent remained the same throughout the year? If not, has it gone up or down? Explain.

Has the agency$$s monthly insurance expense remained the same throughout the year? If not, has it gone up or down? Explain.