Question

On January 1, Pulse Recording Studio (PRS) had the following account balances.

Accounts Payable	$	8,500
Accounts Receivable		6,700
Accumulated Depreciation—Equipment		6,500
Cash		3,760
Cash Equivalents		1,620
Common Stock		10,700
Deferred Revenue		3,900
Equipment		30,000
Notes Payable (long-term)		12,700
Prepaid Rent		2,430
Retained Earnings		2,730
Supplies		520

The following transactions occurred during January.

1. Received $2,490 cash on 1/1 from customers on account for recording services completed in December.
2. Wrote checks on 1/2 totaling $4,380 for amounts owed on account at the end of December.
3. Purchased and received supplies on account on 1/3, at a total cost of $200.
4. Completed $3,900 of recording sessions on 1/4 that customers had paid for in advance in December.
5. Received $4,750 cash on 1/5 from customers for recording sessions started and completed in January.
6. Wrote a check on 1/6 for $4,080 for an amount owed on account.
7. Converted $1,030 of cash equivalents into cash on 1/7.
8. On 1/15, completed EFTs for $1,420 for employees’ salaries and wages for the first half of January.
9. Received $2,880 cash on 1/31 from customers for recording sessions to start in February.

Required:

1. Prepare journal entries for the January transactions. Review the 'General Ledger' and the unadjusted 'Trial Balance' Tabs to see the effect of the transactions on the account balances.
2. Prepare journal entries for items (j)–(n) from the bank reconciliation.
   j. The bank deducted $500 for an NSF check from a customer deposited on January 5.
   k. The check written January 6 has not cleared the bank, but the January 2 payment has cleared.
   l. The cash received and deposited on January 31 was not processed by the bank until February 1.
   m. The bank added $3 cash to the account for interest earned in January.
   n. The bank deducted $3 for service charges.
3. Prepare adjusting journal entries on 1/31 in 'General Journal' Tab. (these are shown as items 15-21).
   o. Depreciation for the month is $170.
   p. Salaries and wages totaling $1,900 have not yet been recorded for January 16–31.
   q. Prepaid Rent will be fully used up by March 31.
   r. Supplies on hand at January 31 were $500.
   s. Received $200 invoice for January electricity charged on account to be paid in February but is not yet recorded.
   t. Interest on the promissory note of $48 for January has not yet been recorded or paid.
   u. Income tax of $1,200 on January income has not yet been recorded or paid.
4. Review the adjusted 'Trial Balance' as of January 31.
5. Prepare an income statement for the period ended January 31 in the 'Income Statement' Tab.
6. Prepare a bank reconciliation in the 'Bank Reconciliation' Tab.
7. Prepare a classified balance sheet as of January 31 in the 'Balance Sheet' Tab.
8. Using the information from the requirements above, complete the 'Analysis' tab.

REQUIREMENTS:

1. General Journal tab - Prepare the journal entries to record the transactions that occurred from January 1-31. Review the accounts as shown in the General Ledger and Trial Balance tabs. Then prepare the necessary adjusting entries at January 31 to correctly report net income for the period.

2. General Ledger tab - Each journal entry is posted automatically to the general ledger. Use the drop-down button to view the unadjusted and adjusted balances in the General Ledger.

3. Trial Balance tab - You may view either the unadjusted and adjusted trial balance by choosing from the drop-down.

4. Income Statement tab - Use the drop-down to select the accounts properly included on the income statement. The unadjusted and adjusted balances will appear for each account based on your selection.

5. Statement of Retained Earnings tab - Prepare the bank reconcilation for the year ended January 31.

6. Balance Sheet tab - Use the drop-down to select the accounts to properly included on the balance sheet. The unadjusted and adjusted balances will appear for each account, based on your selection.

7. Analysis tab - Using the information from the requirements above, complete the 'Analysis' tab.

Answer 1

1. In the books of Pulse Recording Studio:

Transaction	General Journal	Debit	Credit
		$	$
a.	Cash	2,490
	Accounts Receivable		2,490
b.	Accounts Payable	4,380
	Cash		4,380
c.	Supplies	200
	Accounts Payable		200
d.	Deferred Revenue	3,900
	Recording Revenue		3,900
e.	Cash	4,750
	Recording Revenue		4,750
f.	Accounts Payable	4,080
	Cash		4,080
g.	Cash	1,030
	Cash Equivalents		1,030
h.	Salaries & Wages Expense	1,420
	Cash		1,420
i.	Cash	2,880
	Deferred Revenue		2,880
j.	Accounts Receivable	500
	Cash		500
m.	Cash	3
	Interest Revenue		3
n.	Bank Service Charges	3
	Cash		3
o.	Depreciation Expense	170
	Accumulated Depreciation : Equipment		170
p.	Salaries and Wages Expense	1,900
	Salaries and Wages Payable		1,900
q.	Rent Expense	2,430
	Prepaid Rent		2,430
r.	Supplies Expense	220
	Supplies		220
s.	Utilities Expense	200
	Accounts Payable		200
t.	Interest Expense	48
	Interest Payable		48
u.	Income Tax Expense	1,200
	Income Taxes Payable		1,200

3.

Pulse Recording Studio Adjusted Trial Balance January 31
Account Titles	Debit	Credit
	$	$
Cash	4,530
Cash Equivalents	590
Accounts Receivable	4,710
Supplies	500
Equipment	30,000
Accumulated Depreciation : Equipment		6,670
Accounts Payable		440
Salaries and Wages Payable		1,900
Interest Payable		48
Income Taxes Payable		1,200
Deferred Revenue		2,880
Notes Payable		12,700
Common Stock		10,700
Retained Earnings		2,730
Recording Revenue		8,650
Salaries and Wages Expense	3,320
Rent Expense	2,430
Utilities Expense	200
Supplies Expense	220
Depreciation Expense	170
Bank Service Charge Expense	3
Interest Revenue		3
Interest Expense	48
Income Tax Expense	1,200
Totals	$ 47,921	$ 47,921

4.

Pulse Recording Studio Income Statement For the month ended January 31
	$	$
Revenues
Recording Revenue	8,650
Interest Revenue	3
Total Revenues		8,653
Expenses
Salaries and Wages Expense	3,320
Rent Expense	2,430
Utilities Expense	200
Supplies Expense	220
Depreciation Expense	170
Bank Service Charge Expense	3
Interest Expense	48
Income Tax Expense	1,200
Total Expenses		7,591
Net Income		1,062

5.

Pulse Recording Studio Statement of Retained Earnings For the month ended January 31
Balance, January 1	$ 2,730
Add: Net income for the month	1,062
Less: Dividends	0
Balance, January 31	$ 3,792

6.

Pulse Recording Studio Balance Sheet January 31
Assets
Current Assets
Cash	4,530
Cash Equivalents	590
Accounts Receivable	4,710
Supplies	500
Total Current Assets		10,330
Plant Assets
Equipment	30,000
Less: Accumulated Depreciation	(6,670)	23,330
Total Assets		$ 33,660
Liabilities
Current Liabilities
Accounts Payable	440
Salaries and Wages Payable	1,900
Interest Payable	48
Income Taxes Payable	1,200
Deferred Revenue	2,880
Total Current Liabilities		6,468
Long Term Liabilities
Notes Payable		12,700
Total Liabilities		19,168
Stockholders' Equity
Common Stock	10,700
Retained Earnings	3,792
Total Stockholders' Equity		14,492
Total Liabilities and Stockholders' Equity		$ 33,660