Question

Question I (40 marks) Company A's business involves hosting several concerts per year. The company's year and is December 31, 2021. The company records all prepaid costs assets and all earned reveses a abilities and adjusts accounts annually 1. Prepaid supplies amounted to $945 on December 31, 2020. On June 10, 2021, additional supplies were purchased for $1.955 cash On December 31, 2021, a physical count showed that prepaid supplies on hand amounted to 5840. 2. Purchased equipment on August 1, 2021, for $47,520 cash. The equipment was estimated to have a useful life of 12 years. The company's policy is to employ the straight-line method and depreciation is rounded to the nearest month 3. The company puts on eight concerts each season. Season tickets sell for $450 each and 220 sold in July for the upcoming 2021-2022 season, which begins in September 2021 and ends in April 2022 (one concert per month). The company credited Unearned Revenue for the full amount received 4. Every Wednesday, the total payroll is $4,740 for salaries earned during the previous workweek (Monday-Friday). Salaries were last pai on Wednesday, December 29. This year, December 31 falls on a Friday 5. The company rents the theatre to a local children's choir, which uses the space for rehearsals twice a week at a rate of $785 per month. The choir was short of cash at the beginning of December and sent the company a cheque for $560 on December 10, and a promise to pay the balance in January. On January 10, 2022, the company received a cheque for the balance owing from December. At this time, the January rent was also paid. 6. On June 1, 2021, the theatre borrowed $27.600 from its bank at an annual interest rate of 5.0%. The principal and interest are to be repaid on May 30, 2022. 7. Upon reviewing its accounting records on December 31, 2021, the theatre noted that the telephone bill for the month of December had not yet been received. A call to the phone company determined that the December telephone bill was $575. The bill was paid on January 12, 2021. a) Prepare the journal entries to record the 2021 transactions for items 1 through 6. b) Prepare the year-end adjusting entry for items 1 through 7.

Answer 1

a)

No.	Date	General Journal	Debit	Credit
1	June 10, 2021	Prepaid supplies	1955
		Cash		1955
		(To record purchase of supplies)
2	August 1, 2021	Equipment	47520
		Cash		47520
		(To record purchase of equipment)
3	July 2021	Cash (220 x $450)	99000
		Unearned revenue		99000
		(To record sale of season tickets)
4	December 29, 2021	Salaries expense	4740
		Cash		4740
		(To record salaries paid)
5	December 10, 2021	Cash	560
		Rent revenue		560
		(To record rent revenue received)
6	June 1, 2021	Cash	27600
		Notes payable/Bank loan		27600
		(To record amount borrowed)

b)

No.	Date	General Journal	Debit	Credit
1	December 31, 2021	Supplies expense	2060
		Prepaid supplies ($945 + $1955 - $840)		2060
		(To record supplies used)
2	December 31, 2021	Depreciation expense ($47520 x 1/12 x 5/12)	1650
		Accumulated depreciation-equipment		1650
		(To record depreciation on equipment)
3	December 31, 2021	Unearned revenue	49500
		Sales revenue ($99000 x 4/8)		49500
		(To record concert revenue earned)
4	December 31, 2021	Salaries expense	4740
		Salaries payable		4740
		(To record salaries accrued but not paid)
5	December 31, 2021	Accounts receivable	225
		Rent revenue ($785 - $560)		225
		(To record rent revenue earned but not received)
6	December 31, 2021	Interest expense ($27600 x 5% x 7/12)	805
		Interest payable		805
		(To record interest accrued on bank loan)
7	December 31, 2021	Utilities expense/Telephone expense	575
		Accounts payable		575
		(To record telephone expense accrued but not paid)