Sequel Theatre, owned by Nadia Fedkovych, is unique as it shows only movies that are part of a theme with sequels. As
Sequel Theatre, owned by Nadia Fedkovych, is unique as it shows only movies that are part of a theme with sequels. As at June 30, 2014, the ledger of Sequel Theatre showed the following: Cash, $17,000; Land, $80,000;
Buildings, $70,000; Equipment, $20,000; Accounts Payable, $5,000; Mortgage Payable, $118,000; and N. Fedkovych,
Capital, $64,000. In July, the following events and transactions occurred:
July 1 Rented the first four Harry Potter movies, to be shown in the first two weeks of July. The film rental was $25,000. Of that amount, $10,000 was paid in cash and the balance will be paid on July 15. 2 Hired M. Brewer to operate the concession stand. Brewer agreed to pay Sequel Theatre 15% of gross concession receipts, on the last day of each month, for the right to operate the concession stand.
3 Paid advertising expenses, $1,150.
14 Received $35,600 cash from customers for admissions.
15 Paid the balance due from the July 1 movie rental transaction.
16 Received the final four Harry Potter movies to be shown in the last two weeks of July. The film rental cost was $30,000. Paid $15,000 cash and the balance will be paid on August 1.
27 Paid the accounts payable owing at the end of June.
30 Paid salaries of $6,200.
31 Received statement from Brewer showing gross receipts from concessions of $27,300 and the balance due to Sequel Theatre of $4,095 ($27,300 3 15%) for July. Brewer paid $2,500 of the balance due and will pay the rest on August 5.
31 Received $42,400 cash from admissions.
31 Made a $1,725 mortgage payment. Of this amount, $1,250 is a principal payment, and $475 is interest on the mortgage.
In addition to the accounts identified above, Sequel Theatre's ledger includes the following: Accounts Receivable;
Admission Revenue; Concession Revenue; Advertising Expense; Film Rental Expense; Interest Expense; and Salaries
(a) Journalize the July transactions.
(b) Enter the beginning balances in the ledger as at July 1. Use the standard form of account.
(c) Post the July journal entries to the ledger.
(d) Prepare a trial balance at the end of July.
TAKING IT FURTHER A friend of yours is considering buying Sequel Theatre from the current owner. Using the information in the trial balance, comment on whether or not this may be a sound company for your friend to purchase.