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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Case 2-69 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT

After much consideration, Cam and Anna decide to organize their company as a corporation. On January 11 2019, Front Row Entertainment Inc begins operations. Due to Cam’s family connections in the entertainment industry, Cam assumes the major responsibility for signing artists to a promotion contract. Meanwhile. Anna assumes the financial accounting and reporting responsibilities. The following business activities occurred during January:

Jan. 1 Cam and Anna invest $8,000 each in the company in exchange for common stock.

1 The company obtains a $25,000 loan from a local bank. Front Row Entertainment agreed to pay annual interest of 9% each January I, starting in 202.0. It will repeat the amount borrowed in 5 years.

1 The company paid $1,200 in legal fees associated with incorporation.

1 Office equipment was purchased with $1000 in cash.

1 The company pays $800 to rent office space for January.

3 A 1-year insurance policy was purchased for $3,600.

3 Office supplies of $2,500 were purchased from Equipment Supply Services. Equipment Supply

Services agreed to accept $1,000 in 15 days with the remainder due in 30 days.

5 The company signs Charm City, a local band with a growing cult following, to a four-city tour that starts on February 15.

8 Venues for all four Charm City concerts were reserved by paying $10,000 cash.

12 Advertising costs of $4,500 were paid to promote the concert tour.

18 Paid $1,000 to Equipment Supply Services for office supplies purchased on January 3.

25 To aid in the promotion of the upcoming tour, Front Row Entertainment arranged for Charm

City to perform a 20-minute set at a local festival. Front Row Entertainment received $1,000 for

Charm City’s appearance. Of this total amount. $400 was received immediate with the remainder due in 15 days. The festive] took place on January 23.

25 Paid Charm City $800 for performing at the festival. Note: Front Row Entertainment records

the fees paid to the artist in an operating expense account called Artist Fee Expense.

23 Due to the success of the marketing efforts, Front Row Entertainment received $3300 in

advance ticket sales for the upcoming tour.

30 The company collected $200 of the amount due from the January 25 festival.

30 Paid salaries of S1,200 each to Cam and Anna for the month of January.

Required:

2. Post the transactions to the general ledger.

To determine

T-Accounts:

T-accounts as its name derived from shape of the account, is representation of business transaction in their respective account. It helps in organizing and analyzing the transaction according to their similar nature of account.

Post the transactions to the general ledger.

Explanation

Cash

    Bal. 0
    Jan. 1 16,000
    1 25,000
    25 400
    28 3,800
    30 200
    Jan. 1 1,200
    1 7,000
    1 800
    3 3,600
    8 10,000
    12 4,500
    18 1,000
    25 800
    30 2,400
    Bal. 14,100

Accounts Receivable

    Bal. 0
    Jan.25 600
    Jan.30 200
    Bal. 400

Supplies

    Bal. 0
    Jan. 3 2,500
    Bal. 2,500

Prepaid Insurance

    Bal. 0
    Jan. 3 3,600
    Bal. 3,600

Prepaid Rent

    Bal. 0
    Jan. 8 10,000
    Bal. 10,000

Equipment

    Bal. 0
    Jan. 1 7,000
    Bal. 7,000

Accounts Payable

    Jan. 18 1,000Bal. 0
    Jan. 3 2,500
    Bal. 1,500

Unearned Sales Revenue

    Bal. 0
    Jan. 28 3,800
    Bal...

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