Reference no: EM132452984
Jam J, Corp. provides guitar lessons to customers. As of December 31, 2017, Jam J has the following balances in its unadjusted trial balance at the end of its annual accounting period (assume all accounts have their ‘normal' debit/credit balance): Cash $21,325; Accounts Receivable: $16,200; Supplies: $10,400; Prepaid Insurance: $0; Building: $65,000; Accumulated Depreciation-Building: $0; Accounts Payable: $10,500; Salaries Payable: $0; Utilities Payable: $0; Interest Payable: $0; Deferred Revenue: $450; Notes Payable: $40,000; Common Stock: $11,775; Retained Earnings: $10,500; Service Revenue: $194,900; Salaries Expense: $141,300; Depreciation Expense: $0; Insurance Expense: $0; Supplies Expense: $0; Utilities Expense: $11,400; Interest Expense: $0; Dividends: $2,500.
The following additional information was gathered at December 31, 2017, the end of Jam J Corp.'s annual accounting period. Assume Jam J uses an annual accounting period and all adjustments and adjusting entries are made only at the end of the annual accounting period on December 31st (i.e. no adjusting entries have been made yet for 2017 related to the below items):
Point 1) A physical count of supplies revealed that $1,630 worth of supplies remain on hand as of 12/31/17.
Point 2) Workers at Jam J are paid a total of $5,650 every two weeks (assume 10 work days per two-week pay period). Jam J last paid wages to workers for the two-week pay period of December 11-25 on Friday, December 25th. Workers will next be paid $5,650 on Friday, January 8th for the two-week pay period 12/26/17-1/8/18 (assume there are 4 work days left in December 2018 and 6 work days in January 2019 for this pay period).
Point 3) Jam J charges $45 for each private 30-minute guitar lesson. On November 4th, Jam J agreed to provide 12 private guitar lessons to a customer, Kim, during the period of November 4th, 2017 - January 23rd, 2018. As of December 31st, 2017, 8 of the 12 private lessons have been provided to Kim. Assume no entries have been made yet to record the revenue earned from these 8 lessons and that Kim will not pay for these lessons until January 23rd, 2018.
Point 4) The $65,000 building was purchased on April 1, 2017, has an expected useful life of 30 years and has no resale value at the end of its life. Assume Jam J uses straight-line depreciation (i.e. the asset depreciates evenly) over the expected life of the building.
Point 5) Jam J charges $45 for each private 30-minute guitar lesson. On December 1st, 2017 Jam J received $450 in cash from a customer, Lee, who prepaid for 10 private 30-minutes guitar lessons from Jam J. This was recorded as Deferred Revenue. As of December 31st, Jam J had provided 7 of the 10 lessons to Lee.
Point 6) The $40,000 bank note was signed on 10/1/17. The note is due in 6 years and has an annual interest rate of 3.5%. The first interest payment will be made on 9/30/18.
Section A: Record Adjusting Journal Entries (AJEs): Record the six AJEs related to the information above that Jam J would make on 12/31/17. Make sure to include a brief description of each entry (i.e. "to record...") in order to earn full credit. You must show all of your work on calculations to receive full credit.
Section B: Prepare an adjusted trial balance: Prepare an adjusted trial balance for Jam J as of December 31, 2017 with the list of accounts in the following order: assets, liabilities, common stock, retained earnings, revenues, expenses, and dividends.
Section C: Prepare the financial statements: Prepare the following financial statements for Jam J:
- Income statement for the period ended December 31st, 2017.
- Statement of Shareholders' Equity for the period ended December 31st, 2017. Assume during 2017 no additional stock was issued and $2,500 in dividends were paid in cash.
- Classified balance sheet as of December 31st, 2017.