Question

Chapter 3 - Instruction #1

The unadjusted trial balance for PS Music as of July 31, 2019 is as follows:

PS Music Unadjusted Trial Balance July 31, 2019
	Account No.	Debit Balances	Credit Balances
Cash	11	9,945
Accounts Receivable	12	2,750
Supplies	14	1,020
Prepaid Insurance	15	2,700
Office Equipment	17	7,500
Accounts Payable	21		8,350
Unearned Revenue	23		7,200
Peyton Smith, Capital	31		9,000
Peyton Smith, Drawing	33	1,750
Fees Earned	41		16,200
Wages Expense	50	2,800
Office Rent Expense	51	2,550
Equipment Rent Expense	52	1,375
Utilities Expense	53	1,215
Music Expense	54	3,610
Advertising Expense	55	1,500
Supplies Expense	56	180
Miscellaneous Expense	59	1,855
		40,750	40,750

Based on those balances and the additional data below, prepare adjusting journal entries. Include Posting References, using the account numbers in your spreadsheet. You will need the following additional accounts:

Account #	Account Name
18	Accumulated Depreciation-Office Equipment
22	Wages Payable
57	Insurance Expense
58	Depreciation Expense

The data needed to determine adjustments for the two-month period ending July 31, 2019, are as follows:

July 31: During July, PS Music provided guest disc jockeys for KXMD for a total of 115 hours. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of $3,600, which PS Music has already received payment for. Any additional hours beyond 80 will be billed to KXMD at $40 per hour.

Account	Post. Ref.	Debit	Credit

July 31: Supplies on hand at July 31, $275.

Account	Post. Ref.	Debit	Credit

July 31: The balance of the prepaid insurance account relates to the following July 1, 2019 transaction: "Paid a premium of $2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period."

Account	Post. Ref.	Debit	Credit

July 31: Depreciation of the office equipment is $50.

Account	Post. Ref.	Debit	Credit

July 31: The balance of the unearned revenue account relates to the contract between PS Music and KXMD, described in the July 3, 2019 transaction, which included the following: "On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of $3,600." In accordance with the contract, Peyton received $7,200 from KXMD as an advance payment for the first two months.

Account	Post. Ref.	Debit	Credit

July 31: Accrued wages as of July 31, 2019, were $140.

Account	Post. Ref.	Debit	Credit

Answer 1

Adjusting Entries:

Date	Account title and Explanation	Post ref.	Debit	Credit
July 31	Accounts receivable	12	$1,400
	Fees Earned [(115-80) x $40]	41		$1,400
	[To record accrued fees earned]
July 31	Supplies expense [1,020-275]	56	$745
	Supplies	14		$745
	[To record supplies expense]
July 31	Insurance expense [2,700/12]	57	$225
	Prepaid insurance	15		$225
	[To record insurance expense]
July 31	Depreciation expense	58	$50
	Accumulated depreciation- office equipment	18		$50
	[To record depreciation expense]
July 31	Unearned revenue	23	$3,600
	Fees earned	41		$3,600
	[To record fees earned from unearned revenue]
July 31	Wages expense	50	$140
	Wages payable	22		$140
	[To record accrued wages]