Question

URGENT PLEASE URGENT The fiscal year of Baker Street Cinema Limited ends on December 31. The business adjusts its accounts on a monthly basis. The unadjusted trial balance for the month ended August 31, 2020 is given below along with further information relating to adjustments for the month (adjusting entries for the period January 1 – July 31, 2020 have already been made).             

BAKER STREET CINEMA LIMITED
UNADJUSTED TRIAL BALANCE
AUGUST 31, 2020
	Dr	Cr
Cash	46,500
Prepaid movie rental	61,200
Land	120,000
Building	168,000
Accumulated depreciation - Building		14,000
Fixtures	72,000
Accumulated depreciation - Fixtures		24,000
Notes payable		240,000
Accounts payable		40,400
Unearned ticket revenue		1,000
Income taxes payable		4,740
Share Capital - Ordinary		40,000
Retained earnings		38,810
Dividends	15,000
Ticket revenue		305,200
Kiosk revenue		14,350
Salaries expense	68,500
Movie rental expense	94,500
Utilities expense	9,500
Depreciation:Building	4,900
Depreciation: Fixtures	8,400
Interest expense	14,000
Income taxes expense	40,000
	722,500	722,500

Additional Items

1. The expenses relating to movie rental are $10,500 per month. These have been paid in advance.
2. Depreciation rates applied to the building are 5% and the fixtures are 20%.
3. Interest on the note payable is paid on the first of the following month (interest for the month of January is paid on Feb 1st, etc.) It is a 10%, two year note issued on January 1, 2020.
4. Limited time offers are regularly offered to the public. Recently the cinema has introduced a special deal for the local care home allowing buy one get one free each Wednesday afternoon. The care home has made a $1,500 advance payment to avail this facility for its residents for the months of July, August, and September.
5. Baskin Robbins runs a kiosk in the premises and pays the cinema a share of its revenues on or before the 10th of the following month. The amount payable by Baskin Robbins for the month of August amounted to $2,250. This revenue has not yet been recorded. (Use the account Kiosk Revenue.)
6. Unrecorded but accrued salaries at August 31 amount to $1,700.
7. The August income tax expense is estimated at $4,200 (payable before November 15).
8. Utilities expense is recorded as monthly bills are received during the month. No adjusting entries for utilities expense are therefore made at month-end.
9. Cash received from Barnabus School as an advance payment for an upcoming school trip to the cinema was debited for $500, and Accounts Payable was credited for the same amount.
10. A dividend paid during the period of 1,000 was debited to Salaries and Wages Expense for 1,000 and credited to Cash for the same amount.

Instructions

Where necessary, round numbers to the nearest whole number

a. Journalize the above transactions (omit explanations)

b. Prepare the adjusted trial balance for the period ended August 31, 2020

c. Prepare the Income Statement for the period ended August 31, 2020

d. Prepare the Statement of Retained Earnings for the period ended August 31, 2020

e. Prepare a Classified Statement of Financial Position at August 31, 2020

f. Refer to the balances shown in the unadjusted trial balance at August 31. How many months of expense are included in each of the following account balances?

1.         Utilities Expense

2.         Depreciation Expense - Building

3.         Accumulated Depreciation: Building

g. Calculate the total amount of interest expense that will be charged to the income statement over the life of the Notes Payable and the interest payable balance in respect of this Notes Payable at December 31, 2021.

h. If Baker Street Cinema Limited were to close its temporary accounts on August 31, 2020, state the entries for closing the revenue and dividend accounts.

Answer 1

a.

Date	General Journal	Debit	Credit
		$	$
Aug 31, 2020	Prepaid Movie Rental	10,500
	Movie Rental Expense		10,500
Aug 31, 2020	Depreciation : Building ( $ 168,000 x 5 % x 1/12 )	700
	Depreciation : Fixtures ( $ 72,000 x 20 % x 1/12)	1,200
	Accumulated Depreciation: Building		700
	Accumulated Depreciation: Fixtures		1,200
Aug 31, 2020	Interest Expense ( $ 240,000 x 10 % x 1/12 )	2,000
	Interest Payable		2,000
Aug 31, 2020	Unearned Ticket Revenue	500
	Ticket Revenue		500
Aug 31, 2020	Accounts Receivable	2,250
	Kiosk Revenue		2,250
Aug 31, 2020	Salaries Expense	1,700
	Salaries Payable		1,700
Aug 31, 2020	Income Tax Expense	4,200
	Income Taxes Payable		4,200
Aug 31, 2020	Accounts Payable	500
	Unearned Ticket Revenue		500
Aug 31, 2020	Dividends	1,000
	Salaries Expense		1,000

b.

Baker Street Cinema Limited Adjusted Trial Balance August 31, 2020
Accounts	Debit	Credit
	$	$
Cash	46,500
Accounts Receivable	2,250
Prepaid Movie Rental ( 61,200 + 10,500)	71,700
Land	120,000
Building	168,000
Accumulated Depreciation : Building		14,700
Fixtures	72,000
Accumulated Depreciation : Fixtures		25,200
Accounts Payable		39,900
Salaries Payable		1,700
Unearned Ticket Revenue		1,000
Interest Payable		2,000
Income Taxes Payable		8,940
Note Payable		240,000
Share Capital: Ordinary		40,000
Retained Earnings		38,810
Dividends	16,000
Ticket Revenue		305,700
Kiosk Revenue		16,600
Salaries Expense	69,200
Movie Rental Expense	84,000
Utilities Expense	9,500
Depreciation Expense: Building	5,600
Depreciation Expense: Fixtures	9,600
Interest Expense	16,000
Income Tax Expense	44,200
Totals	$ 734,550	$ 734,550

c.

Baker Street Cinema Limited Income Statement For the period ended August 31, 2020
Revenues
Ticket Revenue		$ 305,700
Kiosk Revenue		16,600
Total Revenue		322,300
Expenses
Salaries Expense	69,200
Movie Rental Expense	84,000
Utilities Expense	9,500
Depreciation Expense: Building	5,600
Depreciation Expense: Fixtures	9,600
Interest Expense	16,000
Income Tax Expense	44,200
Total Expenses		238,100
Net Income		$ 84,200

d.

Baker Street Cinema Limited Statement of Retained Earnings For the period ended August 31, 2020
Balance, January 1	$ 38,810
Plus: Net Income	84,200
Less: Dividends	(16,000)
Balance, August 31	$ 107,010