Question

Question #1 (40 marks) Company A's business involves hosting several concerts per year. The company's year-end is December 31, 2021. The company records all prepaid costs as assets and all uneamed revenues as liabilities and adjusts accounts annually. 1. Prepaid supplies amounted to $945 on December 31, 2020. On June 10, 2021, additional supplies were purchased for $1,955 cash On December 31, 2021, a physical count showed that prepaid supplies on hand amounted to $840. 2. Purchased equipment on August 1, 2021, for $47,520 cash. The equipment was estimated to have a useful life of 12 years. The company's policy is to employ the straight-line method and depreciation is rounded to the nearest month. 3. The company puts on eight concerts each season. Season tickets sell for $450 each and 220 sold in July for the upcoming 2021-2022 season, which begins in September 2021 and ends in April 2022 (one concert per month). The company credited Unearned Revenue for the full amount received 4. Every Wednesday, the total payroll is $4,740 for salaries earned during the previous workweek (Monday-Friday). Salaries were last paid on Wednesday, December 29. This year, December 31 falls on a Friday. 5. The company rents the theatre to a local children's choir, which uses the space for rehearsals twice a week at a rate of $785 per month. The choir was short of cash at the beginning of December and sent the company a cheque for $560 on December 10, and a promise to pay the balance in January. On January 10, 2022, the company received a cheque for the balance owing from December. At this time, the January rent was also paid. 6. On June 1, 2021, the theatre borrowed $27,600 from its bank at an annual interest rate of 5.0%. The principal and interest are to be repaid on May 30, 2022 7. Upon reviewing its accounting records on December 31, 2021, the theatre noted that the telephone bill for the month of December had not vet been received. A call to the phone

Answer 1

A B D E F H Sr. No Credit JOURNAL ENTRIES Date Particulars 1 10-Jun Supplies Cash (for supplies purchase) Debit 1955 3 ADJUSTING ENTRIES Date Particulars 31-Dec Supplies expense Supplies (945+1955-840) Debit Credit 2060 2060 1955 5 5 7 47520 1650 21-Aug Equipment Cash 3 47520 31-Dec Depreciation expense Accumulated depreciation (47520/12*5months) 1650 0 3 1-Jul Cash (450*220) 99000 Unearned revenue (Being unerned revenue recorded) 99000 1 2 3 33000 31-Dec Unearned revenue Revenue (Revenue recorded for 4 months) 33000 4 4740 4 31-Dec Salaries expense Salaries Payable (being salaries accrued) 5 6 4740 7 8 560 560 9 5 1-Dec Cash Rent received in advance (being rent received in beginning) 560 225 31-Dec Rent received in advance Accrued rent Rental income (being rent revenue recorded) 0 785 1 2 3 6 27600 690 1-Jun Cash 5% Bank loan 4 27600 31-Dec Interest expense Interest payable (Being interest recorded) 690 5 6 7 575 7 8 31-Dec Telephone bill Telephone bill payable (Being liability accrued) 575 9