Crimson Tide Music Academy offers lessons in playing a wide

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

Solution

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