Preparing Adjusting Entries from a Trial Balance The Off-Campus Theater adjusts its accounts every month. Below is the company’s unadjusted trial balance dated July 31, 2002. Additional information is provided for use in preparing the company’s adjusting entries for the month of July. (Bear in mind that adjusting entries have already been made for the first seven months of 2002, but not for July. ) OFF-CAMPUS THEATER Unadjusted Trial Balance July 31, 2002 Cash$ 16,200 Prepaid film rental28,000 Land100,000 Building240,000 Accumulated depreciation: building$ 16,000 Fixtures and equipment12,000
Accumulated depreciation: fixtures and equipment3,000 Notes payable190,000 Accounts payable3,200 Unearned admissions revenue (YMCA)1,200 Income taxes payable6,100 Capital Stock50,000 Retained earnings29,440 Dividends11,000 Admissions revenue290,200 Concessions revenue17,460 Salaries expense62,900 Film rental expense87,000 Utilities expense6,300 Depreciation expense: building3,000 Depreciation expense: fixtures and equipment1,500 Interest expense8,500 Income taxes expense 30,000________ $606,400$606,400 ————————————————- Other Data 1. Film rental expense for the month is $14,200.
However, the film rental expense for several months has been paid in advance. 2. The building is being depreciated over a period of 40 years (480 months). 3. On the first of each month, the theater pays the interest which accrued in the prior month on its note payable. At July 31, accrued interest payable on this note amounts to $1,583. 4. The theater allows local nursing homes to bring seniors to the movies on any weekday afternoon for a fixed price of $400 per month. On June 30, the nursing home made a $1,200 advance payment covering the months of July, August, and September. . The theater receives a percentage of the revenue earned by Sugar Corporation, the concessionaire operating the snack bar. For snack bar sales in July, Sugar owes Off-Campus Theater $3,700, payable on September 10. No entry has yet been made to record this revenue. (Credit Concessions Revenue. ) 6. Salaries earned by employees, but not recorded or paid as of July 31, amount to $1,900. No entry has yet been made to record this liability and expense. 7. Income taxes expense for July is estimated at $3,000. This amount will be paid in the September 15 installment payment. 8.
Utilities expense is recorded as monthly bills are received. No adjusting entries for utilities expense are made at month-end. Instructions a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including and explanation). b. Refer to the balances shown in the unadjusted trial balance at July 31. How many months of expense are included in each of the following balances? (Remember, Off-Campus Theater adjusts its accounts monthly. Thus, the accounts shown were last adjusted on 6/30/02. ) 1. Utilities Expense 2. Depreciation Expense 3. Accumulated Depreciation: Building