Assignment
Cam and Anna are very satisfied with their first month of operations. Their major effort centered on signing various artists to live performance contracts, and they had more success than they had anticipated. In addition to Charm City, they were able to use their contacts in the music industry to sign other artists. With the tours starting in February, Cam and Anna were eager to hold their first big event. Over the next month, the following transactions occurred.
At the end of February, Cam and Anna felt like their business was doing well; however, they decided that they needed to prepare financial statements to better understand the operations of the business. Anna gathered the following information relating to the adjusting entries that needed to be prepared at the end of February.
1. Two months of interest on the note payable is accrued. The interest rate is .
2. A count of the supplies revealed that of supplies remained on hand at the end of February.
3. Two months of the annual insurance has expired.
4. Depreciation related to the office equipment was .
5. The rental of the venues for all four Charm City concerts was paid in advance on January 8. As of the end of February, Charm City has performed two of the four concerts in the contract.
6. An analysis of the unearned sales revenue account reveals that of the balance relates to concerts that have not yet been performed.
7. Neither Cam nor Anna have received their salary of each for February.
8. A utility bill of relating to utility service on Front Row's office for January and February was received but not paid by the end of February.
Required:
1. Analyze and journalize the February transactions.
2. Set up T-accounts for each account, and post the transactions to the T-accounts. Be sure to use the balances computed in Chapter 2 as the beginning balances of the T-accounts.
3. Prepare a trial balance at February 28, 2013.
4. Prepare and post the adjusting entries needed at February 28, 2013.
5. By how much would net income be overstated or understated if the adjusting entries were not made?
6. Prepare an income statement and a retained earnings statement for the period ending February 28, 2013. Prepare a classified balance sheet as of February 28, 2013.
7. Prepare the necessary closing entries.