Question

Small Musical Production is owned and operated by Richard Small and the company’s financial year end is June 30^th each year. Consider the unadjusted trial balance of the company at June 30, 2014, and the related month-end adjustment data.

Small Musical Production Company
Trial Balance
30-Jun-14
	Balance
	Debit	Credit
Cash	200,000
Accounts receivable	85,000
Prepaid rent	105,000
Supplies	45,000
Motor Vehicle	345,000
Accumulated depreciation		155,000
Salary Payable
Accounts payable		159,000
Unearned service revenue		100,000
R Small, capital		400,000
R Small, drawing	14,000
Service revenue		350,000
Salary expense	255,000
Rent expense	105,000
Miscellaneous expense	10,000
Depreciation expense
Supplies expense
	1,164,000	1,164,000

Adjustment data at June 30 follow:

a. Supplies on hand at year-end, $9,000.                                                           

b. Seven (7) months of rent ($105,000) were paid in advance on February 1, 2014.          c. Depreciation expense on the Motor Vehicle of $34,500 has not been recorded.                

d. Salary not paid at year end $25,000                                                   

e. Service revenue of $9,000 must be accrued.                                                

f. Small received $100,000 in advance for consulting services to be provided evenly            from January 1, 2014, through October 31, 2014. None of the revenue from this client has been recorded.

Requirement:

1. Prepare the adjusting entries for the company based on the information presented.
2. From the information presented, prepare the company’s adjusted trial balance for June 30, 2014
3. Prepare the income statement for the year ended June 30, 2014
4. Prepare the owner’s equity statement for the year ended June 30, 2014
5. Prepare the balance sheet as at June 30,2014

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Small Musical

Adjusting Entries

Refer adjusted Trial Balance below about how the amount is arrived for each journal entry.

Account	Debit $	Credit $
Stores Supplies Expense	36,000.00
Stores Supplies		36,000.00
Rent Expense	15,000.00
Prepaid Rent		15,000.00
Depreciation expense	34,500.00
Accumulated Depreciation		34,500.00
Salary Expense	25,000.00
Salary Payable		25,000.00
Accounts Receivable	9,000.00
Service Revenue		9,000.00
Unearned Service Revenue	60,000.00
Service Revenue		60,000.00

Adjusted Trial Balance	Unadjusted	Adjustments	Adjusted	Remarks
Account Titles	Debit	Credit	Debit	Credit	Debit	Credit
Cash	200,000.00				200,000.00
Accounts Receivable	85,000.00		9,000.00		94,000.00		Service revenue of $9,000 is accrued.
Prepaid Rent	105,000.00			15,000.00	90,000.00		7 months rent paid in advance. 1 month rent will expire i.e. $ 105,000/7= $ 15,000.
Supplies	45,000.00			36,000.00	9,000.00		Supplies on hand at year-end, $9,000. So $ 36,000 consumed.
Motor Vehicle	345,000.00				345,000.00
Accumulated Depreciation		155,000.00		34,500.00		189,500.00	Depreciation expense on the Motor Vehicle of $34,500 is recorded.
Salary Payable				25,000.00		25,000.00	Salary not paid at year end $25,000.
Accounts Payable		159,000.00				159,000.00
Unearned Service Revenue		100,000.00	60,000.00			40,000.00	This is for January to October (10 months). Service Revenue from January to June (6 months) is to be recorded. i.e. $ 100,000/10*6= $ 60,000.
R Small, Capital		400,000.00				400,000.00
R Small, Drawings	14,000.00				14,000.00
Service Revenue		350,000.00		69,000.00		419,000.00	Service revenue of $9,000 is accrued. Unearned Service Revenue from January to June (6 months) is recorded 60,000.
Salaries Expense	255,000.00		25,000.00		280,000.00		Salary not paid at year end $25,000.
Rent Expense	105,000.00		15,000.00		120,000.00
Miscellaneous Expense	10,000.00				10,000.00
Depreciation Expense			34,500.00		34,500.00		Depreciation expense on the Motor Vehicle of $34,500 is recorded.
Supplies Expense			36,000.00		36,000.00		Supplies on hand at year-end, $2,500. So $ 3,700 consumed.
Total	1,164,000.00	1,164,000.00	179,500.00	179,500.00	1,232,500.00	1,232,500.00

Income Statement	Amount $
Service Revenue	419,000.00
Total Revenue	419,000.00
Less: Expenses
Salaries Expense	280,000.00
Rent Expense	120,000.00
Miscellaneous Expense	10,000.00
Depreciation Expense	34,500.00
Supplies Expense	36,000.00
Total Expenses	480,500.00
Net Income	(61,500.00)
Owners Equity
R Small, Capital	400,000.00
Add: Net Income	(61,500.00)
Less: R Small, Drawings	14,000.00
Closing balance	324,500.00

Balance Sheet	Amount $	Amount $
Assets
Current Assets
Cash	200,000.00
Accounts Receivable	94,000.00
Prepaid Rent	90,000.00
Supplies	9,000.00
Total Current Assets		393,000.00
Plant Property & Equipment
Motor Vehicle	345,000.00
Accumulated Depreciation	(189,500.00)	155,500.00
Total Assets		548,500.00
Liabilities
Current Liabilities
Salary Payable	25,000.00
Accounts Payable	159,000.00
Unearned Service Revenue	40,000.00
Total Current Liabilities		224,000.00
Total Liabilities		224,000.00
Owner's Equity		324,500.00
Total Liabilities & Owner's Equity		548,500.00