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	$	10,300
Accounts Receivable		9,500
Supplies		2,000
Prepaid Rent		7,200
Equipment		90,000
Accumulated Depreciation				$	12,000
Accounts Payable					7,700
Salaries Payable					0
Interest Payable					0
Utilities Payable					0
Notes Payable					20,000
Common Stock					45,000
Retained Earnings					19,000
Service Revenue					42,200
Salaries Expense		24,500
Interest Expense		0
Rent Expense		0
Supplies Expense		0
Utilities Expense		2,400
Depreciation Expense		0
Totals	$	145,900		$	145,900

   

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

a. Depreciation of equipment for the year is $6,000.

b. Accrued salaries at year-end should be $2,100.

c. Crimson Tide borrows $20,000 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 12%.

d. Unused supplies at year-end total $700. 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 $7,200 ($600 per month) debiting Prepaid Rent.

f. Unpaid utilities for December total $200.

Prepare post-closing trial balance.

Answer 1

Crimson Tide Music Academy
Trial balance as on December 31, 2018
	UNADJUSTED			ADJUSTED			POST CLOSING
Accounts	Debit	Credit		Debit	Credit		Debit	Credit
Cash	$10,300			$10,300			$10,300
Accounts receivables	$9,500			$9,500			$9,500
Supplies	$2,000			$700			$700
Prepaid rent	$7,200			$1,800			$1,800
Equipment	$90,000			$90,000			$90,000
Accumulated depreciation		$12,000			$18,000			$18,000
Accounts Payable		$7,700			$7,700			$7,700
Salaries Payable					$2,100			$2,100
Interest Payable					$800			$800
Utilities Payable					$200			$200
Notes Payable		$20,000			$20,000			$20,000
Common stock		$45,000			$45,000			$45,000
Retained Earnings		$19,000			$19,000			$18,500
Service Revenue		$42,200			$42,200
Salaries Expense	$24,500			$26,600
Interest Expense				$800
Rent Expense				$5,400
Supplies Expense				$1,300
Utilities Expense	$2,400			$2,600
Depreciation Expense				$6,000
Totals	$145,900	$145,900		$155,000	$155,000		$112,300	$112,300
Interest payable on Note Payable for 4 months = $20000*12% *(4/12) = $800
Adjustment Journal entries
Account Titles	Debit	Credit
Depreciation Expense	$6,000
Accumulated Depreciation		$6,000
Salaries Expense	$2,100
Salaries Payable		$2,100
Interest Expense	$800
Interest Payable		$800
Supplies Expense	$1,300
Supplies		$1,300
Rent Expense	$5,400
Prepaid Rent		$5,400
Utilities Expense	$200
Utilities Payable		$200
Clsoing Journal Entries
Account Titles	Debit	Credit
Income Summary	$500
Service Revenue	42200
Salaries Expense		$26,600
Interest Expense		$800
Rent Expense		$5,400
Supplies Expense		$1,300
Utilities Expense		$2,600
Depreciation Expense		$6,000
Retained Earnings	$500.00
Income Summary		$500.00