Question

Peyton Smith enjoys listening to all types of music and owns countless CDs. Over the years, Peyton has gained a local reputation for knowledge of music from classical to rap and the ability to put together sets of recordings that appeal to all ages. During the last several months, Peyton served as a guest disc jockey on a local radio station. In addition, Peyton has entertained at several friends’ parties as the host deejay. On June 1, 2016, Peyton established a corporation known as PS Music. Using an extensive collection of music MP3 files, Peyton will serve as a disc jockey on a fee basis for weddings, college parties, and other events. During June, Peyton entered into the following transactions:

1	Deposited $4,000 in a checking account in the name of PS Music in exchange for common stock.
	2	Received $3,500 from a local radio station for serving as the guest disc jockey for June.
	2	Agreed to share office space with a local real estate agency, Pinnacle Realty. PS Music will pay one-fourth of the rent. In addition, PS Music agreed to pay a portion of the wages of the receptionist and to pay one-fourth of the utilities. Paid $800 for the rent of the office.
	4	Purchased supplies from City Office Supply Co. for $350. Agreed to pay $100 within 10 days and the remainder by July 5, 2016.
	6	Paid $500 to a local radio station to advertise the services of PS Music twice daily for two weeks.
	8	Paid $675 to a local electronics store for renting digital recording equipment.
	12	Paid $350 (music expense) to Cool Music for the use of its current music demos to make various music sets.
	13	Paid City Office Supply Co. $100 on account.
	16	Received $300 from a dentist for providing two music sets for the dentist to play for her patients.
	22	Served as disc jockey for a wedding party. The father of the bride agreed to pay $1,000 in July.
	25	Received $500 for serving as the disc jockey for a cancer charity ball hosted by the local hospital.
	29	Paid $240 (music expense) to Galaxy Music for the use of its library of music demos.
	30	Received $900 for serving as PS disc jockey for a local club’s monthly dance.
	30	Paid Pinnacle Realty $400 for PS Music’s share of the receptionist’s wages for June.
	30	Paid Pinnacle Realty $300 for PS Music’s share of the utilities for June.
	30	Determined that the cost of supplies on hand is $170. Therefore, the cost of supplies used during the month was $180.
	30	Paid for miscellaneous expenses, $415.
	30	Paid $1,000 royalties (music expense) to National Music Clearing for use of various artists’ music during the month.
		Paid dividends, $500. Peyton Smith enjoys listening to all types of music and owns countless CDs. Over the years, Peyton has gained a local reputation for knowledge of music from classical to rap and the ability to put together sets of recordings that appeal to all ages. During the last several months, Peyton served as a guest disc jockey on a local radio station. In addition, Peyton has entertained at several friends’ parties as the host deejay. On June 1, 2016, Peyton established a corporation known as PS Music. Using an extensive collection of music MP3 files, Peyton will serve as a disc jockey on a fee basis for weddings, college parties, and other events. During June, Peyton entered into transactions that were posted to the accounting equation grid in Part 1 of this problem. Required: 2. Prepare an income statement for PS Music for the month ended June 30, 2016.* 3. Prepare a retained earnings statement for PS Music for the month ended June 30, 2016.* 4. Prepare a balance sheet for PS Music as of June 30, 2016.* * For guidance in completing the financial statements, be sure to read the instructions above each statement carefully. efer to your answers from Chapter 1, Parts 1 and 2 to complete this part. Prepare a retained earnings statement for PS Music for the month ended June 30, 2018. If an amount is zero, enter in a "0". If a net loss is incurred or there is a decrease in retained earnings, enter that amount as a negative number using a minus sign. PS Music Retained Earnings Statement For the Month Ended June 30, 2018 Retained earnings, June 1, 2018 $ Retained earnings, June 30, 2018 $ Net Loss Dividends Change in retained earnings $

Answer 1

2.

PS Music Income Statement For the month ended June 30, 2016
Revenues		$ 6,200
Expenses
Music Expense	$ 590
Advertising Expense	500
Royalty Expense	1,000
Rent Expense: Office	800
Rent Expense: Equipment	675
Supplies Expense	180
Wages Expense	400
Utilities Expense	300
Miscellaneous Expense	415
Total Expenses		4,860
Net Income		$ 1,340

3.

PS Music Statement of Retained Earnings For the month ended June 30, 2016
Retained Earnings, June 1	$ 0
Net Income	1,340
Less: Dividends	(500)
Change in Retained Eanings	840
Retained Earnings, June 30	$ 840

3.

PS Music Balance Sheet June 30, 2016
Assets		Liabilities
Cash	$ 3,920	Accounts Payable	$ 250
Accounts Receivable	1,000	Total Liabilities	250
Supplies	170
		Stockholders Equity
		Common Stock	4,000
		Retained Earnings	840
		Total Stockholders Equity	4,840
Total Assets	$ 5,090	Total Liabilities and Stockholders Equity	$ 5,090