Assessment 3
Elements of Accounting
The transactions completed by Dancin’ Music during October 20X1 were described and recorded at the end
of Chapter 2 in Assessment 2. It is now October 31, the end of the accounting period, and it is time to
complete the accounting cycle. Kris has provided you with the following information.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
As you know, in early October Kris signed a contract with a local radio station, WRAP, to provide
guest spots for the next three months. The contract required Dancin Music to provide a guest disc
jockey for 80 hours per month for a monthly fee of $2,400, and in accordance with the contract,
Kris received $4,800 from WRAP as an advance payment for the first two months. Kris has
informed you that during October he did provide the required 80 hours of service as a DJ for
WRAP.
Kris has done a quick inventory of supplies, and has determined that about $500 of supplies are
still on hand.
Kris has told you that he is about half way finished with a job he started in October for Mays
Department Store. He is making a sound track that can be used as background music that will
relax shoppers and motivate them to spend more time shopping (and buying) while in the store.
Kris will bill Mays for $500 when the job is completely finished.
Kris estimates that the audio equipment has depreciated by $300 during October, and that the van
has depreciated by $150.
The office assistant/receptionist worked on October 29, 30 and 31. You know that this employee
receives $1000 every two weeks, was last paid on October 28 for the work week ended October
28, and that the employees works 5-day work weeks.
Kris told you that he earns interest on the business checking account balance, and that he won’t be
able to tell exactly how much interest has been earned until he receive the bank statement. He
estimates that the amount will be about $10. For an example that illustrates the adjusting entry for
accrued interest revenue, see the sample problem solution in Module 3 of the online course
manual.
Kris estimates that the October utility bill will be about $100 when it is received in November.
The interest charged on the two bank loans must be paid on December 31. Under a special
promotion (“First Month Interest Free”), there was no interest charged during September. The
total interest that accumulated in October on the two loans amounts to $2,000. For an example of
the adjusting entry for accrued interest expense, see the sample problem solution in Module 3 of
the online course manual.
Kris informed you that he had hosted two fraternity parties as a DJ, and that Phi Prepie Pi owed
him $1,000 for the two jobs.
You adjusted other account balances as needed, basing the entries upon your knowledge of the
events and transactions that occurred during September and October.
Required for October:
1.
The trial balance on October 31 is presented on the following page. Enter the trial balance accounts
and amounts in a 10-column worksheet. Then, using the adjusting entry information given above,
complete the worksheet.
2.
From the worksheet, prepare the income statement, the statement of owner’s equity, and a classified
balance sheet
3.
Use the account titles shown on the trial balance and in the ledger pages to correctly journalize the
necessary adjusting entries on page 4 of your journal. Do not enter “explanations” for each
transaction, and do not skip lines between your entries. Be sure to enter all dates and posting
references in proper format.
4.
Post the adjusting entries to the general ledger accounts, entering dates and posting references
properly in the journal and ledger.
5.
Balance the ledger accounts and prepare an adjusted trial balance for October.
6.
7.
8.
Write a business memorandum to your client, Kris, regarding the condition of the business. You
should discuss the business’ profitability and credit-worthiness in your memo, calculating and
including the amount of working capital and the current ratio in your discussion. Save this file.
Journalize the closing entries on page 5 of your journal, and post to the general ledger accounts.
Balance the accounts and prepare a post-closing trial balance. This trial balance should be neatly
typed and printed.
Save your work in a backup file, and then send it to your instructor as an email attachment.
The following is the unadjusted trial balance from October 31, 20X1:
Unadjusted Trial Balance
October 31, 20X1
Cash
Interest Receivable
Accounts Receivable
Supplies
Prepaid Insurance
Music Library
Audio Equipment
Accumulated Depreciation - Equip
Van
Accumulated Depreciation - Van
Interest Payable
Wages Payable
Utilities Payable
Accounts Payable
Unearned Service Revenue
Notes Payable
Kris Payne, Capital
Kris Payne Drawing
DJ Services Revenue
Music Sales Revenue
Music Expense
Advertising Expense
Supplies Expense
Utilities Expense
Gas & Oil Expense
Wages Expense
Rent Expense
Accounting Services Expense
Insurance Expense
Depreciation Expense - Audio
Depreciation Expense - Van
Miscellaneous Expense
Interest Revenue
Interest Expense
Total
45
0
5,900
920
7,500
4,000
11,200
0
20,000
0
0
0
0
7,900
4,800
26,000
14,430
5,000
9,050
250
1,225
980
0
560
750
2,000
1,600
300
0
0
0
450
0
0
62,430
62,430
Scoring will be based upon the following grading rubric:
Assessment III
Scoring Sheet
Student’s Name:
Maximum
Points
Adjustments correctly identified and entered on worksheet. Adjusting
and closing entries properly recorded and correctly posted to ledger.
Accounts balanced correctly. Sum of asset accounts equals sum of
liability and owner’s equity accounts. Amounts recorded agree with
figures reported on the financial statements.
Worksheet and formal income statement, statement of owner’s equity,
and balance sheet properly formatted with correct heading, dates, and
content. Balances agree with those in the general ledger.
Memo to owner correctly analyzes the business’ financial condition and
provides the owner with helpful management suggestions.
Total
Points
Earned
4
4
4
4
16
.