Question

James Harris Enterprises is a small recording studio in Nashville. Rock bands use the studio to produce recordings to distribute to talent agents. New clients are required to pay in advance for services, while bands with good credit rating are billed at the end of the month. Adjusting entries are performed on a monthly basis but performs closing entries annually on December 31. An unadjusted trial balance dated December 31, 2015, is provided below. (Bear in mind that adjusting entries already have been made for the first eleven months of 2015, but not for December.) Data for adjustments: 1. Billed clients $14,400 in studio revenue for December. 2. Studio supplies used during December amount to $7,800. 3. On August 1, 2015, the studio purchased a six-month insurance policy for $1,500. The entire premium was initially debited to Unexpired Insurance. 4. On November 1, 2015, the studio paid $6,000 rent in advance for November, December, and January (3 months). The entire amount was debited to Prepaid Studio Rent. 5. The useful life of the studio's recording equipment is estimated to be 5 years (or 60 months) The straight-line method of depreciation is used. 6. On May 1, 2015, the studio borrowed $16,000 by signing a 12-month, 7 percent note payable to Bank of America. The entire $16,000 plus 12 months' interest is due in full on April 30, 2016.

Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. $ 14,400.00 Accounts Receivables Studio Revenue Earned (To record Studio revenue earned) $ 14,400.00 7,800.00 Studio Supplies Expense Studio Supplies (To record Studio Supplies used) 7,800.00 250.00 Insurance Expense ($1500 x 1/6) Unexpired Insurance (To record expired portion of prepaid insurance) 250.00 2,000.00 Rent Expense ($6000/3) Prepaid Studio Rent |(To record expense portion of prepaid rent) 2,000.00 $ 1,500.00 Depreciation Expense - Recording Equipment ($90000/60) Accumulated Depreciation - Recording Equipment (To record Depreciation Expense) $ 1,500.00

$ 1,500.00 Depreciation Expense - Recording Equipment ($90000/60) Accumulated Depreciation - Recording Equipment (To record Depreciation Expense) 1,500.00 93.33 Interest Expense ($16000x7%x1/12) Interest Payable (To record accrued Interest Expense) 93.33 $ 5,600.00 Unearned Studio Revenue Studio Revenue Earned (To record Studio Revenue Earned) $ 5,600.00 840.00 Salaries Expense Salaries Payable (To record salaries earned by employees) 840.00