Case 3-81 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT
Cam and Anna are very satisfied with their first month of operations. Their major effort centered on signing various artists to live performance contracts, and they had more success than they had anticipated. In addition to Charm City, they were able to use their contacts in the music industry to sign 12 other artists. With the tours starting in February, Cam and Anna were eager to hold their first big event. Over the next month, the following transactions occurred.
Feb. 1 Collected advance ticket sales of S28,400 relating to various concerts that were being promoted.
1 Paid S800 to rent office space in February.
2 Paid Equipment Supply Services $1,500, the balance remaining from the January 3 purchase of supplies.
6 Paid $30, 150 to secure venues for future concerts. (These payments are recorded as Prepaid Rent.)
9 Received S325 related to the festival held on January 25.
12 Purchased S475 of supplies on credit from Equipment Supply Services.
15 Collected S3,400 of ticket sales for the first Charm City concert on the day of the concert.
15 Paid Charm City $9,000 for performing the Feb. I S concert. (Remember: Front Row records the fees paid to the artist in the Artist Fee Expense account.)
20 Collected advance ticket sales of $10, 125 relating to various concerts that were being promoted.
21 Collected $5,100 of ticket sales for the second Charm City concert on the day Of the concert.
21 Paid Charm City $12,620 for performing the Feb. 21 concert.
At the end of February, Cam and Anna felt like their business was doing well; however, they decided that they needed to prepare financial statements to better understand the operations of the business. Anna gathered the following information relating to the adjusting entries that needed to be prepared at the end of February.
Required:
Prepare and post the adjusting entries needed at February 28, 2019.
To prepare: Adjusting entries.
Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.
Journalizing:
Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts.
Accounting rules for journal entries:
Recording interest expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
Interest expense | 375 | |||
Interest Payable | 375 | |||
(to record interest expense) |
   Table (1)
Recording adjustment of supplies:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
Supplies Expense
| 1,150 | |||
Supplies | 1,150 | |||
(to record adjustment of supplies) |
   Table (2)
Recording adjustment of prepaid insurance:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
Insurance Expense
| 600 | |||
Prepaid insurance | 600 | |||
(to record adjustment of prepaid insurance) |
   Table (3)
Recording depreciation expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
Depreciation
| 360 | |||
Accumulated depreciation | 360 | |||
(to record depreciation expense) |
   Table (4)
Recording adjustment of prepaid rent:
Date | Account Title and Explanation | Post Ref |
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