After much consideration, Cam and Anna decide to organize their company as a corporation. On January 1, 2011, Front Row Entertainment Inc. begins operations. Due to Cam’s family connections in the entertainment industry, Cam assumes the major responsibility for signing artists to a promotion contract. Meanwhile, Anna assumes the financial accounting and reporting responsibilities. The following business activities occurred during January:
Jan. 1 Cam and Anna invest $8,000 each in the company in exchange for common stock.
1 The company obtains a $25,000 loan from a local bank. Front Row Entertainment agreed to pay annual interest of 9 percent each January 1, starting in 2012. It will repay the amount borrowed in five years.
1 The company paid $1,200 in legal fees associated with incorporation.
1 Office equipment was purchased with $7,000 in cash.
1 The company pays $800 to rent office space for January.
3 A one year insurance policy was purchased for $3,600.
3 Office supplies of $2,500 were purchased from Equipment Supply Services. Equipment Supply Services agreed to accept $1,000 in 15 days with the remainder due in 30 days.
5 The company signs Charm City, a local band with a growing cult following, to a four-city tour that starts on February 15.
8 Venues for all four Charm City concerts were reserved by paying $10,000 cash.
12 Advertising costs of $4,500 were paid to promote the concert tour.
18 Paid $1,000 to Equipment Supply Services for office supplies purchased on January 3.
25 To aid in the promotion of the upcoming tour, Front Row Entertainment arranged for Charm City to perform a 20-minute set at a local festival. Front Row Entertainment received $1,000 for Charm City’s appearance. Of this total amount, $400 was received immediately with the remainder due in 15 days.
25 Paid Charm City $800 for performing at the festival. Note: Front Row Entertainment records the fees paid to the artist in an operating expense account called Artist Fee Expense.
28 Due to the success of the marketing efforts, Front Row Entertainment received $3,800 in advance ticket sales for the upcoming tour.
30 The company collected the $200 of the amount due from the January 25 festival.
30 Paid salaries of $1,200 each to Cam and Anna.
Required:
1. Analyze and journalize the January transactions.
2. Post the transactions to the general ledger.
3. Prepare a trial balance at January 31, 2011.