The comprehensive problem provides an illustration of the basic accounting cycle. Students must complete the following items for the first month of operation (January) and the second month of operations (February). Hint: Complete all items listed below (WI-NIT) for January prior to starting February. 1. Record transactions with journal entries in the General Journal. 2. Post journal entries to the General Ledger 3. Prepare the trial balance before adjustment on the worksheet). 4. Prepare the adjusting journal entries. 5. Post the adjusting entries to the General Ledger 6. Prepare the adjusted trial balance on the worksheet). 7. Complete the worksheet. 8. Prepare closing journal entries. 9. Post the closing entries to the General Ledger. 10. Prepare the post-closing trial balance. 11. Prepare the following financial statements: a. Income Statement b. Balance Sheet c. Statement of Retained Earings. Comprehensive Problem Part One - January Kellers Music was organized in January of 2017. The company offers music lessons to people of all ages and skill level. The company charges an annual S50 registration fee and S100 monthly due per student for music lessons. You have been hired by the company to install and maintain the company's accounting system. The owner of Kellers Music would like see the following statements at the end of each month: Income Statement Balance Sheet Retained Earnings Statement The following transactions occurred during the month of January Jan. 1 Kellers Music is organized as a corporation and sells S50,000 of capital stock to its owners. 1 Paid the annual insurance premium of $1.824. (Hint: Prepaids are recorded as an asset until the resource has been used up.) 1 Rented a building for $1.250 per month and paid the first three month's rent in advance I Paid S17,340 for the purchase, delivery, and installation of the following: Musical Instruments ......... $12,000 Computer ... ... ... 51.440 Kellers Music was organized in January of 2017. The company offers music lessons to people of all ages and skill level. The company charges an annual S50 registration fee and S100 monthly due per student for music lessons. You have been hired by the company to install and maintain the company's accounting system. The owner of Kellers Music would like see the following statements at the end of each month: . Income Statement Balance Sheet Retained Earnings Statement The following transactions occurred during the month of January Jan. I Kellers Music is organized as a corporation and sells $50,000 of capital stock to its owners. 1 Paid the annual insurance premium of $1.824 (Hint: Prepaids are recorded as an asset until the resource has been used up) 1 Rented a building for S1.250 per month and paid the first three month's rent in advance 1 Paid $17.340 for the purchase, delivery, and installation of the following: Musical Instruments ........ 512.000 Computer $1.440 Furniture.... $3.900 2 Received cash of $1,650 for signing up 11 students. The $1.650 included $550 collected for the annual registration fee and S1,100 for the monthly dues for lessons. 3 Paid S220 for fliers to be distributed this week to local schools 5 Purchased supplies (business cards, ink, paper, pencils, etc...) on account. S225. 5 Purchased snacks on account for grand opening event for S145 (advertising expense) 9 Received cash of $1.250 for signing up 10 additional students. The $1.250 included 5500 collected for the annual registration fee and S750 for the prorated monthly dues for lessons 10 Hired a music teacher to help out in the evenings at $20/hour. (Hint: No entry required.) 15 Signed up 7 additional students for $700. The $700 included 5350 collected for the annual registration fee and $350 for prorated monthly dues for lessons. 24 Paid the music teacher hired on January 10 for 9 hours 26 Signed up 10 additional students which paid an annual registration fee of $50/student and S100/monthly dues. These students will not begin music lessons until next month, but each student paid for February lessons in advance. (Hint: The amount collected for the annual registration fee is carried in January as that is when the registration took place in January. The amount collected for lessons is recorded as earned revenue since the service will not be provided until February). 31 The owner/manager is a musician giving lessons (employee of company) and takes a salary of $2,500 for first month. Additional Information needed for adjusting entries at January 31" 1. Record depreciation expense using the straight line depreciation method for the month of January using the following useful lives (no residual value is anticipated): a. Musical Instruments b. Computer c. Furniture 10 years 4 years 5 years 2. The cost of supplies on hand at January 31" was $95. 3. The music teacher has worked 4.5 hours since January 24 that he hasn't been paid. These wages will not be paid until next pay day. 4. Electricity bill received but unpaid at January 31", totaled S196. 5. Additional adjustments are required for the rent and insurance expired during the month of January Comprehensive Problem Part Two - February In February, Kellers Music begins selling music books. It uses the first-in, first-out method to account for inventories (books) in a perpetual inventory system. Feb. I Received cash of $100/student in from the 25 of the students that signed up last month. 1 There were 3 students from last month did not have payment for February lessons. The parents explained that they will have the money by the end of the month. Mr. Keller agreed to continue to give the students lessons, but get paid later this month. (Hint: Cash to be received in the future is recorded as Accounts Receivable.) 1 Purchased 24 music books at a cost of $5/unit. Received cash of $600 for signing up 4 students. The $600 included $200 collected for the registration fees and $400 for monthly dues. Paid the electricity bill received at the end of last month. Paid music teacher for 16 hours worked over the last couple of weeks. (Hint: The 16 hours includes the 4.5 hours already recorded at the end of January.) 8 Sold 16 music books for $20/unit receiving cash. 14 Purchased 24 more music books. The cost per unit went up to $5.25/unit. 15 Purchased supplies on account, $110. 17 Sold 16 music books for $20/unit receiving cash. 18 Purchased 20 more music books. The cost per unit went up to $5.50/unit. 21 Paid music teacher for 14 hours. 21 Sold 20 music books for $20/unit receiving cash. 27 Paid cash of $160 on account. 28 Owners are paid a dividend of S250. 28 The owner/manager receives a salary of $2,650 for the month. 28 Received S200 from 2 of the students that did not have the money at the beginning of the month. Additional information needed for adjusting entries at February 28, 2017: 1. Record appropriate entries for the depreciation of assets using the straight line method. 2. Supplies on hand at Feb. 28'", $135. 3. The music teacher has worked 6.5 hours since she was last paid on February 21". These wages will not be paid until next payday. 4. Electricity bill received but unpaid at Feb. 28'", totaled $185. 5. Additional adjustments are required for the rent and insurance expired in February 6. If you have not already done so then don't forget to record the unearned revenue from last month that has been earned. Journal Post Ref. el. Date Description Debit Credit TUR? III I PTP General Ledger or TILL IIIII Per IIIIII III IIIII IAL || | 2| IIIII | IIIIIIIIIIIPT Account Paul LIIT TRO IP TI le en Post TIIII HH TI THE Kellers Music Work Sheet For the month ended Jan 31, 2017 Austed The Bande Tra Balance Austents BICO Accounts Reciale Inventory Books T Prepaid Rent Prepad Insurance Music Instruments Accumulated Deprinstruments Accumulated Dap-Computer Furniture Accumulated Depr - Fumure Accounts Payable Salaries Payable Unearned Revenue Capital Stock Retained Eaminos Registration Fees Cost of Merchandise Sold Salaries Expense Rent Expense Supplies Expense Depreciation Expense Insurance Expense Uses Expense Advertising Expense Miscellaneous Expense Total: Net Income Grand Total: Kellers Music Work Sheet For the month ended Feb. 28th 2017 tamberts AddThis O CH strumente ad Det-Compu Taper Kellers Music Income Statement For the month ended Feb. 28th, 2017 Kellers Music Retained Earnings Statement For the month ended Feb. 28th, 2017 Kellers Music Balance Sheet January 31, 2017 Assets Liabilities Stockholders' Equity Kellers Music Balance Sheet February 28, 2017 Stockholders' Equity Kellers Music Post-Closing Trial Balance For the month ended , 2017 The comprehensive problem provides an illustration of the basic accounting cycle. Students must complete the following items for the first month of operation (January) and the second month of operations (February). Hint: Complete all items listed below (WI-NIT) for January prior to starting February. 1. Record transactions with journal entries in the General Journal. 2. Post journal entries to the General Ledger 3. Prepare the trial balance before adjustment on the worksheet). 4. Prepare the adjusting journal entries. 5. Post the adjusting entries to the General Ledger 6. Prepare the adjusted trial balance on the worksheet). 7. Complete the worksheet. 8. Prepare closing journal entries. 9. Post the closing entries to the General Ledger. 10. Prepare the post-closing trial balance. 11. Prepare the following financial statements: a. Income Statement b. Balance Sheet c. Statement of Retained Earings. Comprehensive Problem Part One - January Kellers Music was organized in January of 2017. The company offers music lessons to people of all ages and skill level. The company charges an annual S50 registration fee and S100 monthly due per student for music lessons. You have been hired by the company to install and maintain the company's accounting system. The owner of Kellers Music would like see the following statements at the end of each month: Income Statement Balance Sheet Retained Earnings Statement The following transactions occurred during the month of January Jan. 1 Kellers Music is organized as a corporation and sells S50,000 of capital stock to its owners. 1 Paid the annual insurance premium of $1.824. (Hint: Prepaids are recorded as an asset until the resource has been used up.) 1 Rented a building for $1.250 per month and paid the first three month's rent in advance I Paid S17,340 for the purchase, delivery, and installation of the following: Musical Instruments ......... $12,000 Computer ... ... ... 51.440 Kellers Music was organized in January of 2017. The company offers music lessons to people of all ages and skill level. The company charges an annual S50 registration fee and S100 monthly due per student for music lessons. You have been hired by the company to install and maintain the company's accounting system. The owner of Kellers Music would like see the following statements at the end of each month: . Income Statement Balance Sheet Retained Earnings Statement The following transactions occurred during the month of January Jan. I Kellers Music is organized as a corporation and sells $50,000 of capital stock to its owners. 1 Paid the annual insurance premium of $1.824 (Hint: Prepaids are recorded as an asset until the resource has been used up) 1 Rented a building for S1.250 per month and paid the first three month's rent in advance 1 Paid $17.340 for the purchase, delivery, and installation of the following: Musical Instruments ........ 512.000 Computer $1.440 Furniture.... $3.900 2 Received cash of $1,650 for signing up 11 students. The $1.650 included $550 collected for the annual registration fee and S1,100 for the monthly dues for lessons. 3 Paid S220 for fliers to be distributed this week to local schools 5 Purchased supplies (business cards, ink, paper, pencils, etc...) on account. S225. 5 Purchased snacks on account for grand opening event for S145 (advertising expense) 9 Received cash of $1.250 for signing up 10 additional students. The $1.250 included 5500 collected for the annual registration fee and S750 for the prorated monthly dues for lessons 10 Hired a music teacher to help out in the evenings at $20/hour. (Hint: No entry required.) 15 Signed up 7 additional students for $700. The $700 included 5350 collected for the annual registration fee and $350 for prorated monthly dues for lessons. 24 Paid the music teacher hired on January 10 for 9 hours 26 Signed up 10 additional students which paid an annual registration fee of $50/student and S100/monthly dues. These students will not begin music lessons until next month, but each student paid for February lessons in advance. (Hint: The amount collected for the annual registration fee is carried in January as that is when the registration took place in January. The amount collected for lessons is recorded as earned revenue since the service will not be provided until February). 31 The owner/manager is a musician giving lessons (employee of company) and takes a salary of $2,500 for first month. Additional Information needed for adjusting entries at January 31" 1. Record depreciation expense using the straight line depreciation method for the month of January using the following useful lives (no residual value is anticipated): a. Musical Instruments b. Computer c. Furniture 10 years 4 years 5 years 2. The cost of supplies on hand at January 31" was $95. 3. The music teacher has worked 4.5 hours since January 24 that he hasn't been paid. These wages will not be paid until next pay day. 4. Electricity bill received but unpaid at January 31", totaled S196. 5. Additional adjustments are required for the rent and insurance expired during the month of January Comprehensive Problem Part Two - February In February, Kellers Music begins selling music books. It uses the first-in, first-out method to account for inventories (books) in a perpetual inventory system. Feb. I Received cash of $100/student in from the 25 of the students that signed up last month. 1 There were 3 students from last month did not have payment for February lessons. The parents explained that they will have the money by the end of the month. Mr. Keller agreed to continue to give the students lessons, but get paid later this month. (Hint: Cash to be received in the future is recorded as Accounts Receivable.) 1 Purchased 24 music books at a cost of $5/unit. Received cash of $600 for signing up 4 students. The $600 included $200 collected for the registration fees and $400 for monthly dues. Paid the electricity bill received at the end of last month. Paid music teacher for 16 hours worked over the last couple of weeks. (Hint: The 16 hours includes the 4.5 hours already recorded at the end of January.) 8 Sold 16 music books for $20/unit receiving cash. 14 Purchased 24 more music books. The cost per unit went up to $5.25/unit. 15 Purchased supplies on account, $110. 17 Sold 16 music books for $20/unit receiving cash. 18 Purchased 20 more music books. The cost per unit went up to $5.50/unit. 21 Paid music teacher for 14 hours. 21 Sold 20 music books for $20/unit receiving cash. 27 Paid cash of $160 on account. 28 Owners are paid a dividend of S250. 28 The owner/manager receives a salary of $2,650 for the month. 28 Received S200 from 2 of the students that did not have the money at the beginning of the month. Additional information needed for adjusting entries at February 28, 2017: 1. Record appropriate entries for the depreciation of assets using the straight line method. 2. Supplies on hand at Feb. 28'", $135. 3. The music teacher has worked 6.5 hours since she was last paid on February 21". These wages will not be paid until next payday. 4. Electricity bill received but unpaid at Feb. 28'", totaled $185. 5. Additional adjustments are required for the rent and insurance expired in February 6. If you have not already done so then don't forget to record the unearned revenue from last month that has been earned. Journal Post Ref. el. Date Description Debit Credit TUR? III I PTP General Ledger or TILL IIIII Per IIIIII III IIIII IAL || | 2| IIIII | IIIIIIIIIIIPT Account Paul LIIT TRO IP TI le en Post TIIII HH TI THE Kellers Music Work Sheet For the month ended Jan 31, 2017 Austed The Bande Tra Balance Austents BICO Accounts Reciale Inventory Books T Prepaid Rent Prepad Insurance Music Instruments Accumulated Deprinstruments Accumulated Dap-Computer Furniture Accumulated Depr - Fumure Accounts Payable Salaries Payable Unearned Revenue Capital Stock Retained Eaminos Registration Fees Cost of Merchandise Sold Salaries Expense Rent Expense Supplies Expense Depreciation Expense Insurance Expense Uses Expense Advertising Expense Miscellaneous Expense Total: Net Income Grand Total: Kellers Music Work Sheet For the month ended Feb. 28th 2017 tamberts AddThis O CH strumente ad Det-Compu Taper Kellers Music Income Statement For the month ended Feb. 28th, 2017 Kellers Music Retained Earnings Statement For the month ended Feb. 28th, 2017 Kellers Music Balance Sheet January 31, 2017 Assets Liabilities Stockholders' Equity Kellers Music Balance Sheet February 28, 2017 Stockholders' Equity Kellers Music Post-Closing Trial Balance For the month ended , 2017