Melody Lane Co. provides music lessons to many clients across the city. The following information is available to be used in recording annual adjusting entries at the company's September 30, 2014, year end:
1. On October 1, 2013, the company had a balance of $2,000 in its supplies account. Additional supplies were purchased during the year totalling $1,800. The supplies inventory on September 30, 2014, amounts to $750.
2. On November 1, 2013, Melody Lane purchased a one-year insurance policy for $3,200.
3. On February 28, 2014, Melody Lane borrowed $20,000 from the bank and signed a 10-month, 6% note payable. Interest and principal are to be paid at maturity.
4. On March 1, 2014, Melody Lane purchased a grand piano (to be used in music lessons) for $24,000. The piano's estimated useful life is 15 years.
5. On June 1, 2014, a client paid $1,500 for six months of lessons starting June 1, 2014. Melody Lane recorded this cash receipt as Unearned Revenue.
6. On July 15, 2014, the company paid $9,000 to Pinnacle Holdings to rent additional studio space for nine months starting August 1. Melody Lane recorded the full payment as Prepaid Rent.
7. On September 1, 2014, Melody Lane signed a contract with a neighborhood school to provide weekly piano lessons to some of its students for a fee of $2,000 per month. The contract calls for lessons to start on October 1, 2014.
8. Music lessons were provided to a local church group for $1,500 on September 28, 2014. Melody Lane has not yet invoiced the group or recorded the transaction.
9. Melody Lane's instructors have earned wages of $2,900 for the last week of September, 2014. This amount will be paid to the instructors on the next payday: October 2, 2014.
10. In early October 2014, Melody Lane received an invoice for $475 from the utility company for September utilities. The amount has not yet been recorded or paid.
Prepare the adjusting journal entries.
TAKING IT FURTHER Is it better to prepare monthly adjusting entries or annual adjusting entries as Melody
Lane does? Why?