Question

Crane Co. provides music lessons to many clients across the city. The following information is available to be used in recording annual adjusting entries at the company’s September 30, 2021, year end:

1.		On October 1, 2020, the company had a balance of $1,980 in its supplies account. Additional supplies were purchased during the year totalling $1,760. The supplies inventory on September 30, 2021, amounts to $600.
2.		On November 1, 2020, Crane purchased a one-year insurance policy for $3,000.
3.		On January 2, 2021, a client paid $1,500 for six months of lessons starting April 2, 2021.
4.		On February 1, 2021, Crane purchased a grand piano (to be used in music lessons) for $25,200. The piano’s estimated useful life is 14 years.
5.		On May 1, 2021, Crane borrowed $27,180 from the bank and signed a 10-month, 8% note payable. Interest and principal are to be paid at maturity.
6.		On August 1, 2021, Crane signed a contract with a neighbourhood school to provide weekly piano lessons to some of its students for a fee of $1,700 per month. The contract called for lessons to start on September 1, 2021. The school has not yet been sent an invoice for the month of September.
7.		On August 15, 2021, the company paid $9,090 to Pinnacle Holdings to rent additional studio space for nine months starting September 1. Crane recorded the full payment as Prepaid Rent.
8.		Crane’s instructors have earned salaries of $2,500 for the last week of September 2021. This amount will be paid to the instructors on the next payday: October 6, 2021.
9.		Music lessons were provided to a local church group for $1,200 on September 30, 2021. Crane has not yet invoiced the group or recorded the transaction.
10.		In early October 2021, Crane received an invoice for $985 from the utility company for September utilities. The amount has not yet been recorded or paid.

Prepare the adjusting journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to the nearest whole dollar, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Adjusting Entries:

	Account title and explanation	Debit	Credit
1	Supplies expense [1980+1760-600]	$3,140
	Supplies		$3,140
	[To record supplies expense]
2	Insurance expense [$3,000 x 11/12]	$2,750
	Prepaid insurance		$2,750
	[To record insurance expense]
3	Unearned service revenue	$1,500
	Service revenue		$1,500
	[To record revenue earned from unearned]
4	Depreciation expense [($25,200/14) x 8/12]	$1,200
	Accumulated depreciation		$1,200
	[To record depreciation expense]
5	Interest expense [$27,810 x 8% x 6/12]	$1,112
	Interest payable		$1,112
	[To record accrued interest expense]
6	Accounts receivable	$1,700
	Service revenue		$1,700
	[To record accrued revenue]
7	Rent expense [$9,090 x 1/12]	$758
	Prepaid rent		$758
	[Tio record rent expense]
8	Salaries expense	$1,200
	Salaries payable		$1,200
	[To record accrued salaries expense]
9	Accounts receivable	$1,200
	Service revenue		$1,200
	[To record accrued revenue]
10	Utilities expense	$985
	Utilities payable		$985
	[To record accrued utilities]