Question
The following independent events for New Age Theatre Ltd. during the year ended November 30, 2018, require a transaction journal entry or an adjusting journal
The following independent events for New Age Theatre Ltd. during the year ended November 30, 2018, require a transaction journal entry or an adjusting journal entry, or both. The company adjusts its accounts annually.
1. | On June 1, 2017, the theatre purchased vehicles for $80,700 cash. The vehicles estimated useful life is five years and the company uses straight-line depreciation. | |
2. | The theatre has eight plays each season. This years season starts in October 2018 and ends in May 2019 (one play per month). Season tickets sell for $400. On October 1, 470 season tickets were sold for the 20182019 season. The theatre credited Unearned Revenue for the full amount received on October 1 and uses a Ticket Revenue account to record revenue earned from season tickets. | |
3. | Supplies on hand amounted to $1,750 at the beginning of the year. On February 16, additional Supplies were purchased for cash at a cost of $2,800. At the end of the year, a physical count showed that supplies on hand amounted to $520. | |
4. | On June 1, 2018, the theatre borrowed $101,100 from the Bank of Montreal at an interest rate of 7%. The principal is to be repaid in one year. The interest is payable on the first day of each following month, and was last paid on November 1. | |
5. | The New Age Theatre rents a portion of its facilities for $540 a month to a local dance club that uses the space for rehearsals. On November 2, the dance clubs treasurer made a mistake and accidentally sent a cheque for only $200 for the November rent. (Hint: Use the Unearned Revenue account to record the rent received in advance.) The dance clubs treasurer promised to send a cheque in December for the balance when she returned from vacation. On December 4, the theatre received a $340 cheque for the balance owing from November. | |
6. | The total weekly payroll is $7,350, paid every Monday for employee salaries earned during a seven-day workweek running from Sunday to Saturday. Salaries were last paid (and recorded) on Monday, November 26, and will be paid next on Monday, December 3. November 30 falls on a Friday this year. | |
7. | Upon reviewing its income tax calculations on November 30, the theatre noted that an additional $1,280 of income tax was owed. This additional amount was paid on December 14. |
a. Prepare the journal entry to record the original transaction for items 1, 2, 3, 4, and 5
b. Prepare the year-end adjusting entry required for items 1 through 7 on November 30
c.Record the subsequent cash transactions in December for (1) the interest paid on December 1 (item 4), (2) the cheque received on December 4 (item 5), (3) the payroll paid on December 3 (item 6), and (4) the income tax paid on December 14 (item 7)
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