The accounts listed below appeared in the December 31 trial balance of the Savar

Question

The accounts listed below appeared in the December 31 trial balance of the Savard Theater. From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (1) The equipment has an estimated life of 16 years and a salvage value of $23,840 at the end of that time. (Use straight-line method.) (2) The note payable is a 90-day note given to the bank October 20 and bearing interest at 8%. (Use 360 days for denominator.) (3) In December, 2,700 coupon admission books were sold at $30 each. They could be used for admission any time after January 1. (4) Advertising expense paid in advance and included in Advertising Expense $1,550.

Explanation / Answer

1) Equipment - depriciation Cost 199360 Salvage value 23840 estimated life 16 SLM depriciation pa 10970 ( 199360 - 23840) / 16 Depriciation - equipment Dr 10970             Accumulated depriciation - equipment Cr 10970 2) Interest expense Dr 1453.51                  Interest payable Cr 1453.51 (89600*8%/360*73) 3) Admission revenue Dr 81000.00              Advance revenue received Cr 81000.00 ( 2700*30) 4) Prepaid expense Dr 1550.00         Advertising expense Cr 1550.00 5) Salaries and wages expense Dr 5100.00              Salaries and wages payable Cr 5100.00

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