Crimson Tide Music Academy offers lessons in playing a wide range of musical ins

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.

   

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.

  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

Explanation / Answer

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

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