Question

Crimson Tide Music Academy offers lessons in playing a wide range of musical instruments. The unadjusted trial balance as of December 31, 2018, appears below. December 31 is the company's fiscal year-end.

     

Accounts	Debits			Credits
Cash	$	9,300
Accounts Receivable		8,500
Supplies		1,500
Prepaid Rent		6,000
Equipment		75,000
Accumulated Depreciation				$	10,000
Accounts Payable					6,700
Salaries Payable					0
Interest Payable					0
Utilities Payable					0
Notes Payable					15,000
Common Stock					35,000
Retained Earnings					14,000
Service Revenue					45,000
Salaries Expense		23,500
Interest Expense		0
Rent Expense		0
Supplies Expense		0
Utilities Expense		1,900
Depreciation Expense		0
Totals	$	125,700		$	125,700

   

Information necessary to prepare the year-end adjusting entries appears below.

a. Depreciation of equipment for the year is $5,000.

b. Accrued salaries at year-end should be $1,600.

c. Crimson Tide borrows $15,000 on September 1, 2018. The principal is due to be repaid in four years. Interest is payable each August 31 at an annual rate of 10%.

d. Unused supplies at year-end total $600. Crimson Tide debits Supplies at the time supplies are purchased.

e. Crimson Tide opens a second studio by paying for one year of rent in advance on April 1, 2018, for $6,000 ($500 per month) debiting Prepaid Rent.

f. Unpaid utilities for December total $100.

1., 2. & 6. Enter the unadjusted balances from the trial balance and post the adjusting entries to the T-accounts, and post the closing entries to the T-accounts.

3. Prepare an adjusted trial balance.

4-a. Prepare an income statement for the year ended December 31, 2018.

4-b. Prepare a statement of shareholders' equity for the year ended December 31, 2018. Assume that no common stock is issued during the year.

4-c. Prepare a classified balance sheet for the year ended December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

5. Record closing entries. (If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

7. Prepare a post-closing trial balance.

Answer 1