Village Theatre Inc. is a corporation in a small town formed by a group of investors who originally contributed $80,000 in exchange for 8,000 shares of $1 par value stock in 2016. The corporation owns its own building and projector equipment and shows first run movies. Vendors rent movies to Village Theatre Inc. All vendors bill Village Theatre for the rentals and Village Theatre honors the agreement to pay them within 30 days.

The theatre has a single ticket booth outside. One employee sells the tickets and another collects the tickets at the door. The theatre also has a special program with the YMCA whereby Village Theatre allows the local YMCA to bring children attending after school programs to the movies on any weekday. The YMCA pays Village Theatre a flat annual fee each year on September 1. This fee covers the children from the YMCA for a one-year period running from 9/1 through 8/31.

Village Theatre has a concession stand. However, the concession stand is actually operated by a separate entity called Tasty Treats. Tasty Treats provides an accounting of its monthly sales to Village Theatre at the end of each month. Village Theatre then invoices Tasty Treats for a percentage of their sales. Tasty Treats pays this invoice within 30 days.

Village Theatre pays an annual insurance premium each November 1. This covers insurance for the period 11/1 10/31. The insurance premium seems to increase each year.

Assume the current year is 2019. The Balance Sheet as of 1/1 is provided in the workbook as Exhibit 1.

The following information pertains to transactions during 2019:

1. The note payable and the $600 of interest payable were paid on 1/1/19.
2. The income taxes due at the end of the year were paid in full in March 2019.
3. Acquired a computer on 4/1/19 for $4,000. Paid $1,000 down and signed a one-year note for the balance. Principle and interest will be due on 4/1/04.
4. Admission fees to the theatre and collected at the door amounted to $450,000 during 2019.
5. The YMCA paid an annual fee of $9,900 for the period 9/1/19 8/31/20 for the children in their after school program.
6. Acquired $6,000 of office supplies during the year with cash.
7. Vendors rented movies to Village Theatre and billed the theatre a total of $200,000 during the year. Village Theatre paid a total of $180,000 on their accounts payable.
8. Paid salaries during the year of $100,000.
9. Paid light and power bills of $30,000 during the year.
10. Acquired another lot of land during the year for $20,000.
11. Total billings made by Village Theatre to Tasty Treats for the concessions amounted to $13,000. Total payments made by Tasty Treats to Village Theatre during the year amounted to $12,500.
12. The annual insurance premium paid by Village Theatre for the period 11/1/19 10/31/20 amounted to $42,000.
13. Village Theatre declared dividends to its shareholders of $2,500 at the end of each quarter in 2019. The payment date for the dividends was one month after the declaration date.
14. Payments on the mortgage are due on the last day of each month. During 2019, Village Theatre made total payments of $11,700. $3,500 of the payment was for principle reduction, $8,200 was for interest.
15. During the year, the city expropriated half of the land from Village Theatre. The city paid Village Theatre $46,000 for land. Village Theatre had originally paid $40,000 for land.

Information for year-end adjusting entries:

1. During the year the company decided the building had an estimated remaining useful life of 13 years from 1/1/19 and an estimated salvage value of $40,500. (Use the search function of eBook to find an example of change in estimate.)
2. During the year they realized they had made an error regarding the recording of depreciation in previous years related to the auto. It was 2017s depreciation they had failed to record. (Use the search function in your eBook to find an example of depreciation error correction.)
3. The computer has an estimated useful life of 5 years and an estimated residual value of $0. The companys depreciation policy is to record depreciation from the date of acquisition. Assume straight-line depreciation.)
4. Hint: Are there other assets that need current year depreciation recorded?
5. Hint: remember to look at the fees received in advance from the YMCA.
6. Hint: remember to look at the insurance premium.
7. Interest on the note payable is 10%.
8. Unused office supplies at the end of the year are $2,000.
9. Salaries are paid each Friday during the year. Salaries earned by the employees from the last pay period to the end of the year amount to $2,000.
10. Assume a 40% tax rate on all items. Also, assume there are no difference between book income and tax income.

Requirements:

1. Open the Workbook template for Village Theatre. Use the Balance Sheet dated 1/1/19 (Opening Balances Tab) to answer the following questions. Include your answers in the excel workbook provided in the work sheet titled Schedule A. Show support for your answers.

1. Assume the company has declared dividends of $84,000 since incorporation. How much has the company had in total earnings from date of incorporation to 12/31/18? (For preparation of stockholders equity statement later in the problem, assume the same annual dividend since and including 2016. Assume 30% of earnings to date were recognized in 2016, 30% in 2017 and 40% in 2018.)
2. If the useful life of the building is 20 years and it has no residual value, when was the building acquired? (Assume straight-line depreciation)
3. If the useful life of the projector equipment is 10 years and it has no estimated residual value, when was the projector equipment acquired? (Assume straight-line depreciation)
4. If the auto was acquired on 1/1/16 and had an estimated life of 8 years and an estimated residual value of $0, how much accumulated depreciation should be reported on the 1/1 balance sheet? (Assume straight-line depreciation)
5. The balance sheet shows $6,000 of unearned admission fees from the YMCA. How many months are unearned? What must have been the total amount paid to Village Theatre by the YMCA on 9/1/18?
6. The balance sheet shows $30,000 of prepaid insurance. How many months are prepaid? What must have been the total insurance premium paid by Village Theatre on 11/1/18?

(5 Week 2 Village Theatre Problem - Workbook Template (1).x Home Insert Draw Page Layout Formulas Data Review View Arial 10 TWrap Text Currency Paste BIU EXHIBIT1 Village Theatre Balance Sheet 1-Jan-15 2 4 6 Current Assets: 7 Cash 8 Accounts Receivable Tasty Treats 9 Prepaid Insurance 10 Office Supplies 11 Total Current Assets $20,000 $700 $30,000 $1,000 Current Liablities Accounts Pavable Notes Payable Uneamed Admission Fees Taxes Payable Interest Payable 10,000 S24,000 $6,000 $4,000 $600 $51,700 Total Current Liabilities $44,600 Noncurrent Liabilities Mortgage Payable 14 Noncurrent Assets: 15 Land 16 Building 17 Acc. Depr $80,000 $100,000 $170,000 $25,500 $144,500 Stockholders' Equity $32,000 $8,000 $24,000 19 Auto 20 Accumulated Depr 21 22 Projector Equipment 23 Acc. Depr 24 25 Total Non Current Assets 26 27 Total Assets 28 29 30 31 32 Capital Stock APIC Retained Eamings $8,000 72,000 $104,400 $36,000 $7,200 $28,800 Total Equity $184,400 $277,300 $329,000 Total Liabilities and Equity $329,000 34 35 36 37 38 (5 Week 2 Village Theatre Problem - Workbook Template (1).x Home Insert Draw Page Layout Formulas Data Review View Arial 10 TWrap Text Currency Paste BIU EXHIBIT1 Village Theatre Balance Sheet 1-Jan-15 2 4 6 Current Assets: 7 Cash 8 Accounts Receivable Tasty Treats 9 Prepaid Insurance 10 Office Supplies 11 Total Current Assets $20,000 $700 $30,000 $1,000 Current Liablities Accounts Pavable Notes Payable Uneamed Admission Fees Taxes Payable Interest Payable 10,000 S24,000 $6,000 $4,000 $600 $51,700 Total Current Liabilities $44,600 Noncurrent Liabilities Mortgage Payable 14 Noncurrent Assets: 15 Land 16 Building 17 Acc. Depr $80,000 $100,000 $170,000 $25,500 $144,500 Stockholders' Equity $32,000 $8,000 $24,000 19 Auto 20 Accumulated Depr 21 22 Projector Equipment 23 Acc. Depr 24 25 Total Non Current Assets 26 27 Total Assets 28 29 30 31 32 Capital Stock APIC Retained Eamings $8,000 72,000 $104,400 $36,000 $7,200 $28,800 Total Equity $184,400 $277,300 $329,000 Total Liabilities and Equity $329,000 34 35 36 37 38