Question

The following independent events for Repertory Theatre Ltd. during the year ended December 31 2018, require a transaction journal entry or an adjusting journal entry, or both. The company adjusts its accounts annually.

1. Supplies on hand amounted to $1,500 at the beginning of the year. On March 1, additional supplies were purchased for $4,250 cash. At the end of the year, a physical count showed that supplies on hand amounted to $1,000.

2. The theatre owns a vehicle that was purchased on January 2 2018, for $120,000. The vehicle's estimated useful life is 4 years.

3. The theatre has nine plays each season, which starts in September 2018 and ends in May 2019 (one play per month). Season tickets sell for $360. On August 2, 600 season tickets were sold for the upcoming 2018-2019 season. The theatre credited Unearned Revenue for the full amount received on August 2 and uses a Ticket Revenue account to record revenue earned from season tickets.

4. On June 1, the theatre borrowed $30,000 from La Caisse Populaire Desjardins at an interest rate of 6%, to be repaid in one year. The interest is payable on the first day of each following month, and was last paid on December 1.

5. The total weekly payroll is $9,000, paid every Friday for employee salaries earned during the prior six-day workweek (Saturday - Thursday). This year, December 31 falls on Monday. Salaries were last paid (and recorded) on Friday, December 28 and will be paid next Friday, January 4.

6. Repertory Theatre rents a portion of its facilities for $600 a month to a local seniors' choir that uses the space for rehearsals. The choir's treasurer was ill during December, and on January.

7. the theatre receives a $1,200 cheque for both the amount owing for the month of December and the rent for the month of January. 7. Upon reviewing its books on December 31, the theatre noted that a telephone bill for the next month of December had not yet been received. A call to Bell Aliant determined that the telephone bill was for $1,125. The bill was paid on January 11. (Hint: use the Utilities Expense account for telephone services)

a) Prepare the journal entries to record the original transactions for items 1,2,3 and 4.

b) Prepare the year-end adjusting entries required for items 1 through 7 on December 31.

c) Record the subsequent cash transactions in January for (1) the interest paid on January 1 (item 4), (2) payment payroll on January 4 (item 5), (3) receipt of the rent on January 7 (item 6), and (4) payment of the telephone bill on January 11 (item 7)

Answer 1

As per policy, only one question or its four parts are allowed to answer, so answering a & b :

a & b)

Journal Entries alongwith adjusting entries :

Sl. no.	Date	Accounts Titles & explanations	Debit $	Credit $
1	Mar 1 18	purchases - supplies	4250
		cash		4250
	Dec 31	Supplies Expense	4750
		Supplies		4750
		(1500+4250-1000)
2	Jan 2 18	Vehicle	120000
		Cash		120000
	Dec 31	Depreciaton exp.	30000
		Acc. Depreciation - Vehicle		30000
		(120000 /4)
3	Aug 2 18	Cash	216000
		Unearned Revenue		216000
		(600*360)
	Dec 31	Unearned Revenue	96000
		Revenue		96000
		(600*360*4/9)
4	June 1 18	Cash	30000
		Loan		30000
	Dec 31	Interest expense	900
		Interest payable		900
		(30000 * 6% * 6/120
5	Dec 31 18	Salary & Wages expense	4500
		Salary & Wages payable		4500
		(for three days = 9000 *3/6)
	Jan 4 19	Salary & Wages payable	4500
		Cash		4500
6	Dec 31 18	Rent Expense	600
		Rent Expense payable		600
		(for December)
7	Dec 31 18	Cash	1200
		Unearned rent revenue		600
		Rent revenue		600
		( unearned for jan 19 - 50% of 1200)
	Dec 31	Utilities expense	1125
		Utilities expense payable		1125
		(telephone expenses for Dec)