Kellers Music was organized in January of 2017. The company offers music lessons to people of all ages and skill level. The company charges an annual $50 registration fee and $100 monthly due per student for music lessons. You have been hired by the company to install and maintain the company’s accounting system. The owner of Kellers Music would like see the following statements at the end of each month:
Income Statement
Balance Sheet
Retained Earnings Statement
The following transactions occurred during the month of January:
Jan. 1 Kellers Music is organized as a corporation
and sells $50,000 of capital stock to its owners.
1 Paid the annual insurance premium of $1,824.
(Hint: Prepaids are recorded as an asset until the resource has
been used up.)
1 Rented a building for $1,250 per month and paid the first three
month’s rent in advance.
1 Paid $17,340 for the purchase, delivery, and
installation of the following:
Musical Instruments . . . . . . . .
. . $12,000
Computer . . . . . . . . . . . . .
. . . . . . $1,440
Furniture . . . . . . . . . . . . .
. . . . . . $3,900
2 Received cash of $1,650 for signing up 11 students. The $1,650
included $550 collected for the
annual registration fee and $1,100 for the monthly
dues for lessons.
3 Paid $220 for fliers to be distributed this week to local
schools.
5 Purchased supplies (business cards, ink, paper,
pencils, etc…) on account, $225.
5 Purchased snacks on account for grand opening event for $145
(advertising expense).
9 Received cash of $1,250 for signing up 10 additional students.
The $1,250 included $500
collected for the annual registration fee and $750 for the prorated
monthly dues for lessons.
10 Hired a music teacher to help out in the evenings at
$20/hour. (Hint: No entry required.)
Signed up 7 additional students for $700. The $700 included $350
collected for the annual
registration fee and $350 for prorated monthly dues for
lessons.
24 Paid the music teacher hired on January 10th for 9 hours.
26 Signed up 10 additional students which paid an annual
registration fee of $50/student and
$100/monthly dues. These students will not begin music
lessons until next month, but each
student paid for February lessons in advance.
(Hint: The amount collected for the annual registration fee is
earned in January as that is when
the registration took place in January. The amount collected for
lessons is recorded as unearned
revenue since the service will not be provided until
February).
31 The owner/manager is a musician giving lessons (employee of
company) and takes a salary of
$2,500 for first month
Income Statement | |||
Particulars | $ | $ | |
Registration Fees | 1900 | =550+500+350+(50*10) | |
Monthly Fees | 2200 | 4100 | =1100+750+350 |
Expenses: | |||
Rent Expense | 1250 | =1250*1 | |
Advertisement Expense | 365 | =220+145 | |
Salary Expense | 2680 | 4295 | =(9*20)+2500 |
Net Income/(Loss) | -195 |
Balance Sheet | |||
Assets | $ | $ | |
Non-Current Assets: | |||
Musical Instruments | 12000 | ||
Computer | 1440 | ||
Furniture | 3900 | 17340 | |
Current Assets: | |||
Cash | 29141 | =50000-1824-(1250*3)-17340+1650-220-145+1250+700-(9*20)+(50*10)+(100*10)-2500 | |
Prepaid Insurance | 1824 | ||
Prepaid Rent | 2500 | =1250*2 | |
Supplies | 225 | 33690 | |
Total | 51030 | ||
Equity & Liabilities | $ | $ | |
Equity: | |||
Common Stock | 50000 | ||
Retained Earnings | -195 | 49805 | |
Liabilities: | |||
Accounts Payable | 225 | ||
Unearned Revenue | 1000 | 1225 | |
Total | 51030 |
Retained Earnings Statement | |
Particulars | $ |
Opening Balance | 0 |
Net Income for the month | -195 |
Closing Balance | -195 |
Kellers Music was organized in January of 2017. The company offers music lessons to people of...
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