Question

Campus Theater adjusts its accounts every month. The company's unadjusted trial balance dated August 31, current year, appears as follows. Additional information is provided for use in preparing the company’s adjusting entries for the month of August. (Bear in mind that adjusting entries have already been made for the first seven months of current year, but not for August.)

CAMPUS THEATER
UNADJUSTED TRIAL BALANCE
AUGUST 31, CURRENT YEAR
Cash $ 24,000
Prepaid film rental 37,440
Land 144,000
Building 201,600
Accumulated depreciation: building $16,800
Fixtures and equipment 43,200
Accumulated depreciation: fixtures and equipment 14,400
Notes payable 216,000
Accounts payable 5,280
Unearned admissions revenue (YMCA) 1,200
Income taxes payable 5,688
Capital stock 48,000
Retained earnings 55,932
Dividends 18,000
Administrative Revenue 366,240
Concessions revenue 17,220
Salaries expense 82,200
Film rental expense 113,400
Utilities expense 11,400
Depreciation expense: building 5,880
Depreciation expense: fixtures and equipment 5,040
Interest expense 12,600
Income taxes expense 48,000
$ 746,760 $746,760
Other Data

Film rental expense for the month is $18,240. However, the film rental expense for several months has been paid in advance.
The building is being depreciated over a period of 20 years (240 months).
The fixtures and equipment are being depreciated over a period of five years (60 months).
On the first of each month, the theater pays the interest that accrued in the prior month on its note payable. At August 31, accrued interest payable on this note amounts to $1,800.
The theater allows the local YMCA to bring children attending summer camp to the movies on any weekday afternoon for a fixed fee of $600 per month. On June 28, the YMCA made a $1,800 advance payment covering the months of July, August, and September.
The theater receives a percentage of the revenue earned by Tastie Corporation, the concessionaire operating the snack bar. For snack bar sales in August, Tastie owes Campus Theater $2,700, payable on September 10. No entry has yet been made to record this revenue. (Credit Concessions Revenue.)
Salaries earned by employees, but not recorded or paid as of August 31, amount to $2,040. No entry has yet been made to record this liability and expense.
Income taxes expense for August is estimated at $5,040. This amount will be paid in the ­September 15 installment payment.
Utilities expense is recorded as monthly bills are received. No adjusting entries for utilities expense are made at month-end.

Required:
For each of the numbered paragraphs, prepare the necessary adjusting entry.

Answer 1

Answer:

Debit Rental expense $18,240 Credit Prepaid Rent expense $18,240

Debit depreciation$840 Credit Accumulated depreciation on Building $840

Debit depreciation $720 Credit Accumulated depreciation on fixtures and equipment $720

Debit Interest expense $1,800 Credit Accrued interest payable $1,800

Debit Unearned admission Revenue $600 Credit Revenue $600

Debit Accounts Receivable $2,700 Credit Concession Revenue $2,700

Debit Salaries expense $2,040, Credit Salaries Payable $2,040

Debit Income tax Expense $5,040 Credit Current Tax Payable $5,040

Debit Utility expense $12,600 Credit Utility bills $12,600

Explanation:

Depreciation  : Building = 201,600/240 = $840

Answer 2

Following are the Journal Entries to the given question:

                                       Campus Theater  

                              Adjusting Journal Entries  

 Date                                  Accounts                        Dr.                          Cr.  

$31-Aug$              Expenses for film rental          $18,240.00$

                            Film Rental Prepaid                                           $18,240.00$

$31-Aug$          Buildings: Depreciation Expense     $840.00$

                    Depreciation Expense: Buildings                                $840.00$  

$31-Aug$       Depreciation Expense: Fixtures and Equipment$720.00$

                Accumulated Depreciation: Fixtures and Equipment            $720.00$

$31-Aug$            Interest Expense                     $1,800.00$

                     Interest Payable                                                               $1,800.00$

$31-Aug$           Unearned Admissions Revenue (YMCA)     $600.00$  

              Admissions Revenue                                                              $600.00$  

$31-Aug$        Receivable Revenue from Concessions   $2,700.00$      

                 Revenue from Concessions                                             $2,700.00$    

$31-Aug$          Salaries Expense                       $2,040.00$

              Salaries Payable                                                              $2,040.00$

$31-Aug$           Income Taxes Expense              $5,040.00$  

                 Income Taxes Payable                                                    $5,040.00$  

$31-Aug$           No adjusting entry required

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