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 unearned revenues as liabilities and adjusts accounts annually. 1. Prepaid supplies amounted to $835 on December 31, 2020. On June 10, 2021, additional supplies were purchased for $1,890 cash. On December 31, 2021, a physical count showed that prepaid supplies amounted to $940. 2. Purchased equipment on August 1, 2021, for $50,400 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 S430 each and 225 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 Uneamed Revenue for the full amount received 4. Every Wednesday, the total payroll 55,520 for salaries eamed during the previous workweek (Monday-Friday). Salaries were last paid on Wednesday, December 29. This year, December 31 falls on a 5. The company also rents the space to a local children's choir, which uses the space for rehearsals twice a week at a rate of S740 per month. The choir was short of cash at the beginning of December and sent the company a cheque for $540 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 company borrowed $24,000 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 company noted that the telephone bill for the month of December had not yet been received. A call to the phone company determined that the December telephone bill was $530. The bill was paid on January 12, 2021 a) Prepare the journal entries to record the 2021 transactions for items 1 through 6. b) Prepare the year end adjusting entry for items I through in hox below will be marked)

Answer 1

Journal entries
No.	Date	General journal	Debit	Credit
1	June 10	Supplies	1,890
		Cash		1,890
		(To record purchase of supplies on cash.)
2	Aug 1	Equipment	50,400
		Cash		50,400
		(To record purchase of equipment on cash.)
3	Apr	Cash	96,750
		Unearned Season Tickets Income		96,750
		(To record cash received in advance for games not played.) (430*225)
4	Dec 29	Salaries expense	5,520
		Cash		5,520
		(To record salaries expense paid.)
5	Dec 10	Cash	540
		Rent revenue		540
		(To record rent revenue on cash.)
6	June 1	Cash	24,000
		Notes payable		24,000
		(To record Borrowed cash through sinning notes payable.)

Part 2

Adjusting entries
No.	Date	General journal	Debit	Credit
1	Dec 31	Supplies expense	1,785
		Supplies		1,785
		(To record supply used during the period.) (835+1890-940)
2	Dec 31	Depreciation expense (Aug to Dec = 5) (4200*5/12)	1,750
		Accumulated depreciation - equipment		1,750
		(To record depreciation expense - equipment) (50400/12=4200)
3	Dec 31	Unearned Season Tickets Income	48,375
		Season Tickets Income		48,375
		(To record Season Tickets Income Revenue earned.) (Sep to Dec = 4) (96750*4/8)
4	Dec 31	Salaries expense	2,208
		Salaries payable		2,208
		(To record salaries expense this paid in future.) (Work day = 5) (Dec 30 and Dec 31 =2) (5520*2/5)
5	Dec 31	Rent receivable	200
		Rent revenue		200
		(To record rent revenue.) (740-540)
6	Dec 31	Interest expense	700
		Interest payable		700
		(To record accrued interest expense.) (June to Dec = 7) (24000*5%*7/12)
7	Dec 31	Telephone expenses	530
		Accrued expense payable		530
		(To record telephone expense.)