Question

he unadjusted trial balance of PS Music as of July 31, 2018, along with the adjustment data for the two months ended July 31, 2018, are shown in Chapter 3. Based upon the adjustment data, the following adjusted trial balance was prepared:

PS Music

ADJUSTED TRIAL BALANCE

July 31, 2018

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	9,945.00
2	Accounts Receivable	4,150.00
3	Supplies	275.00
4	Prepaid Insurance	2,475.00
5	Office Equipment	7,500.00
6	Accumulated Depreciation-Office Equipment		50.00
7	Accounts Payable		8,350.00
8	Wages Payable		140.00
9	Unearned Revenue		3,600.00
10	Common Stock		9,000.00
11	Dividends	1,750.00
12	Fees Earned		21,200.00
13	Wages Expense	2,940.00
14	Office Rent Expense	2,550.00
15	Equipment Rent Expense	1,375.00
16	Utilities Expense	1,215.00
17	Music Expense	3,610.00
18	Advertising Expense	1,500.00
19	Supplies Expense	925.00
20	Insurance Expense	225.00
21	Depreciation Expense	50.00
22	Miscellaneous Expense	1,855.00
23	Totals	42,340.00	42,340.00

Required:

1.	(Optional) Using the data from Chapter 3, prepare an end-of-period spreadsheet on a sheet of paper or using spreadsheet software.
2.	Prepare an income statement, a retained earnings statement, and a balance sheet.*
3.	A. Journalize the closing entries. Refer to the Chart of Accounts for exact wording of account titles. B. Post the closing entries. The income summary account is #34 in the ledger of PS Music. Indicate closed accounts by inserting a 0 (zero) in either of the Balance columns opposite the closing entry. No entry is required in the Item column.
4.	Prepare a post-closing trial balance. * For guidance in completing the financial statements, be sure to read the instructions above each statement carefully.

Chart of Accounts

CHART OF ACCOUNTS
PS Music
General Ledger
ASSETS 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Office Equipment 18 Accumulated Depreciation-Office Equipment LIABILITIES 21 Accounts Payable 22 Wages Payable 23 Unearned Revenue EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends 34 Income Summary	REVENUE 41 Fees Earned EXPENSES 50 Wages Expense 51 Office Rent Expense 52 Equipment Rent Expense 53 Utilities Expense 54 Music Expense 55 Advertising Expense 56 Supplies Expense 57 Insurance Expense 58 Depreciation Expense 59 Miscellaneous Expense

Labels and Amount Descriptions

Labels
Cash flows from financing activities
Cash flows from investing activities
Cash flows from operating activities
Current assets
Current liabilities
Expenses
For the Two Months Ended July 31, 2018
July 31, 2018
Property, plant, and equipment
Amount Descriptions
Change in retained earnings
Net decrease in cash during June and July
Net increase in cash during June and July
Net income
Net loss
Retained earnings, June 1, 2018
Retained earnings, July 31, 2018
Total assets
Total current assets
Total expenses
Total liabilities
Total liabilities and stockholders’ equity
Total property, plant, and equipment
Total stockholders’ equity

Income Statement

2. Prepare an income statement. Refer to the Chart of Accounts and the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred, enter that amount as a negative number using a minus sign. A colon (:) will automatically appear if it is required.

2. Prepare a retained earnings statement. Refer to the Chart of Accounts for exact wording of account titles. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred or there is a decrease in owner’s equity, enter that amount as a negative number using a minus sign.

2. Prepare a classified balance sheet. Refer to the Chart of Accounts and the Labels and Amount Descriptions list for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. “Less:” or “Plus:” will automatically appear if it is required.

3. A. Journalize the closing entries. (Please note that pages 1, 2, and 3 show the transactions and adjusting entries that were recorded in Continuing Problems 2 and 3.) Refer to the Chart of Accounts for exact wording of account titles.

3. B. Post the closing entries. The income summary account is #34 in the ledger of PS Music. Indicate closed accounts by inserting a 0 (zero) in either of the Balance columns opposite the closing entry. Do not put an entry in the “Item” column.

4. Prepare a post-closing trial balance.

Answer 1

2.

PS Music Income Statement For the two months ended July 31, 2018
Fees Earned		$ 21,200
Expenses
Wages Expense	$ 2,940
Office Rent Expense	2,550
Equipment Rent Expense	1,375
Utilities Expense	1,215
Music Expense	3,610
Advertising Expense	1,500
Supplies Expense	925
Insurance Expense	225
Depreciation Expense	50
Miscellaneous Expense	1,855
Total Expenses		16,245
Net Income		$ 4,955

PS Music Statement of Retained Earnings For the two months ended July 31, 2018
Retained Earnings, balance June 1	$ 0
Add: Net income	4,955
Less: Dividends	(1,750)
Retained Earnings, balance, July 31	$ 3,205

PS Music Balance Sheet July 31, 2018
Assets
Current Assets
Cash	$ 9,945
Accounts Receivable	4,150
Supplies	275
Prepaid Insurance	2,475
Total Current Assets		$ 16,845
Property Plant and Equipment
Office Equipment	7,500
Accumulated Depreciation: Office Equipment	(50)	7,450
Total Assets		$ 24,295
Liabilities
Current Liabilities
Accounts Payable	8,350
Wages Payable	140
Unearned Revenue	3,600
Total Liabilities		12,090
Stockholders Equity
Common Stock	9,000
Retained Earnings	3,205
Total Stockholders Equity		12,205
Total Liabilities and Stockholders Equity		$ 24,295

3. Closing entries:

Date	General Journal	Debit	Credit
		$	$
July 31, 2018	Fees Earned	21,200
	Income Summary		21,200
	To close revenue account
July 31, 2018	Income Summary	16,245
	Wages Expense		2,940
	Office Rent Expense		2,550
	Equipment Rent Expense		1,375
	Utilities Expense		1,215
	Music Expense		3,610
	Advertising Expense		1,500
	Supplies Expense		925
	Insurance Expense		225
	Depreciation Expense		50
	Miscellaneous Expense		1,855
	To close expense accounts
July 31, 2018	Income Summary	4,955
	Retained Earnings		4,955
	To transfer income summary to retained earnings
July 31, 2018	Retained Earnings	1,750
	Dividends		1,750
	To close dividends account

4.

PS Music Post Closing Trial Balance July 31, 2018
Accounts	Debit	Credit
Cash	$ 9,945
Accounts Receivable	4,150
Supplies	275
Prepaid Insurance	2,475
Office Equipment	7,500
Accumulated Depreciation: Office Equipment		$ 50
Accounts Payable		8,350
Wages Payable		140
Unearned Revenue		3,600
Common Stock		9,000
Retained Earnings		3,205
Totals	$ 24,345	$ 24,345