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Brushstroke Art Studio

See attached Adjusting and closing entries problem. (Adjusting journal entries, adjusted trial balance, income statement, statement of retained earnings, balance sheet, year-end closing entries, and after-closing trial balance)

Brushstroke Art Studio, Inc. provides quality instruction to aspiring artists. The business
adjusts its accounts monthly, but performs closing entries annually on December 31.
This is the studio's unadjusted trial balance dated December 31, 2007.

Unadjusted Trial Balance
December 31, 2007

Debits Credits
Cash $22,380
Client fees receivable 71,250
Supplies 6,000
Prepaid studio rent 2,500
Studio equipment 96,000
Accumulated depreciation: studio equipment $52,000
Accounts payable 6,420
Note payable 24,000
Interest payable 480
Unearned client fees 8,000
Income taxes payable 5,000
Capital stock 50,000
Retained earnings 20,000
Client fees earned 82,310
Supplies expense 4,000
Salary expense 17,250
Interest expense 480
Studio rent expense 11,250
Utilities expense 3,300
Depreciation expense: studio equipment 8,800
Income taxes expense 5,000
$248,210 $248,210

Other Data
1. Supplies on hand at December 31, 2007, total $1,000.
2. The studio pays rent quarterly (every 3 months). The last payment was made Nov 1,
2007. The next payment will be made early in February 2008.
3. Studio equipment is being depreciated over 120 months (10 years).
4. On October 1, 2007, the studio borrowed $24,000 by signing a 12 month, 12% note
payable. The entire amount, plus interest, is due on September 30, 2008.
5. At December 31, 2007, $3,000 of previously unearned client fees had been earned.
6. Accrued, but unrecorded and uncollected client fees earned total $690 at Dec 31, 2007
7. Accrued, but unrecorded and unpaid salary expense totals $750 at Dec 31, 2007.
8. Accrued income taxes expense for the entire year ending Dec 31, 2007, total $7,000.
The full amount is due early in 2008.
a. Prepare the necessary adjusting journal entries on December 31, 2007. Prepare also an
adjusted trial balance dated December 31, 2007.
b. From the adjusted trail balance prepared in part a. prepare an income statement and
statement of retained earnings for the year ended December 31, 2007. Also prepare the
company's balance sheet dated December 31, 2007.
c. Prepare the necessary year-end closing entries.
d. Prepare an after-closing trial balance.
e. Has the studio's monthly rent remained the same throughout the year? If not, has it
gone up or donw? Explain.


Solution Summary

The solution explains the adjusting entries, preparation of financial statements, closing entries and the post closing trial balance for Brushstroke Art Studio