Total Marks: 100 marks Question 1 Part I (70 marks) Chill Time Co. ("Chill Time") is a production house of concerts for independent singers who have just started their career in the music industry. Usually the singers (customers) are billed after the concerts are over. If a singer pays Chill Time in advance for services, Chill Time will credit its unearned fees account. Adjusting entries are normally performed on a monthly basis. Closing entries are performed annually on 31 December 2022. Below is the Chill Time's unadjusted trial balance as at 31 December 2022. Chill Time Co. Unadjusted Trial Balance As at 31 December 2022 Account Title Cash Accounts receivable Debit $ Credit $ 211,000 89,000 Prepaid salaries 38,000 Prepaid advertising 62,000 Prepaid rent 40,000 Supplies 8,400 L&S equipment 360,000 Accumulated depreciation: L&S equipment 66,000 Accounts payable 32,900 Income tax payable 49,000 Interest payable 5,000 Unearned fees 70,000 Notes payable (due on Dec 1, 2022) 150,000 Share capital (issued 100,000 Ordinary Share) 100,000 Retained earnings 103,000 Dividends 10,500 Fees earned 918,000 Depreciation expense: L & S equipment 48,000 Supplies expense 12,000 Salaries expense 242,000 Rent expense Advertising expense 300,000 15,000 Utilities expense 4,000 Interest expense Income tax expense TOTAL 5,000 49,000 1,493,900 1,493,900 Page 2 The following items are for adjusting entries if needed: (1) There was a $1,600 cash purchase of supplies on 30 December 2022 not recorded in the book. (2) The staff received salaries in advance. All prepaid salaries were earned after the last concert was held on 31 December 2022. (3) L&S equipment provides lighting and sound for the concerts and depreciates by straight-line method with a useful life of 5 years. Adjusting entries were only made up to end of September. (4) Chill Time recorded receipt of $65,000 previously paid by the singer Terror in advance for a concert to be held in December. On 31 December 2022, the concert was held successfully. (5) Accrued but unbilled fees earned during December 2022 amounted to $17,000. (6) On 28 December 2022, Chill Time signed an agreement with the rapper Byson B to hold three concerts from 1 to 3 January 2023 for service fees of $95,000. (7) On 31 October 2022, Chill Time paid and recorded 2 months' advertising fees in advance to the MTR Co. The advertisement will appear in the MTR station in December 2022 and next January. (8) On 1 November 2022, Chill Time recorded three months' rent paid in advance covering up to end of January 2023. (9) On 1 April 2022, Chill Time signed a $150,000, 5% per annum, 8-month note payable and all the accrued interest adjusting were already recorded. The note and all interest due were paid by Chill Time on 1 December, but no entries were made on the payment. (10) On 31 December 2022, the Board of Directors declared to pay dividend $0.1 per share to its shareholders which to be paid out next month. (11) Income taxes expense for the entire year is estimated at $53,000 to be paid next year. Required: (a) Prepare the necessary adjusting journal entries on 31 December 2022. No explanation is required. Show all workings in your journal. Use the account titles given in the Trial Balance if the account is already open. If it does not require adjustment, state "No entry" and the name of the accounting principle applied. (23 marks) (b) Prepare the Income Statement for the year ended 31 December 2022, under the captions of Service Revenues, Expenses, Profit before taxes and Profit after taxes. (12 marks) (c) Prepare the Statement of Financial Position as at 31 December 2022, under the captions of Total Assets, Total Liabilities, Total Equity, Total Liabilities and Equity. (d) Prepare year-end closing entries. (20 marks) (15 marks) Page 3