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Campus Theater Adjusts Its Accounts Every Month

Campus Theater adjusts its accounts monthly. Additional information is provided to prepare adjusting entries for August 2015. This includes accrued expenses for film rental, interest payable, salaries, income taxes, and revenue for concessions and fees paid in advance by the YMCA. Adjusting entries will record expenses in the proper month and accruals of unpaid liabilities and unearned revenue.

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Henock Abyot
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135 views2 pages

Campus Theater Adjusts Its Accounts Every Month

Campus Theater adjusts its accounts monthly. Additional information is provided to prepare adjusting entries for August 2015. This includes accrued expenses for film rental, interest payable, salaries, income taxes, and revenue for concessions and fees paid in advance by the YMCA. Adjusting entries will record expenses in the proper month and accruals of unpaid liabilities and unearned revenue.

Uploaded by

Henock Abyot
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Campus Theater adjusts its accounts every month.

The company’s unadjusted trial balance dated


August 31, 2015, is on page 176. 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 2015, but not for August.)

Other Data
1. Film rental expense for the month is $15,200. However, the film rental expense for several months
has been paid in advance.
2. The building is being depreciated over a period of 20 years (240 months).
3. The fixtures and equipment are being depreciated over a period of five years (60 months).
4. 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 $1,500.
5. The theater allows the local YMCA to bring children attending summer camp to the movies on any
weekday afternoon for a fixed fee of $500 per month. On June 28, the YMCA made a $1,500
advance payment covering the months of July, August, and September.
6. 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 $2,250, payable on September 10. No entry has yet been made to record this revenue.
(Credit Concessions Revenue.)
7. Salaries earned by employees, but not recorded or paid as of August 31, amount to $1,700. No
entry has yet been made to record this liability and expense.
8. Income taxes expense for August is estimated at $4,200. This amount will be paid in the
September 15 installment payment.
9. Utilities expense is recorded as monthly bills are received. No adjusting entries for utilities
expense are made at month-end.

Instructions
a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an
explanation).
b. Refer to the balances shown in the unadjusted trial balance at August 31. How many months of
expense are included in each of the following account balances? (Remember, Campus Theater
adjusts its accounts monthly. Thus, the accounts shown were last adjusted on July 31, 2015.)
1. Utilities Expense
2. Depreciation Expense
3. Accumulated Depreciation: Building
c. Assume the theater has been operating profitably all year. Although the August 31 trial balance
shows substantial income taxes expense, income taxes payable is a much smaller amount. This
relationship is quite normal throughout much of the year. Explain.

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