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, 2011

Other Data
1. Supplies on hand at December 31, 2011, total $1,000.

2. The studio pays rent quarterly (every three months). The last payment was made November 1, 2011. The next payment will be made early in February 2012.

3. Studio equipment is being depreciated over 120 months (10 years).

4. On October 1, 2011, the studio borrowed $24,000 by signing a 12-month, 12 percent note payable. The entire amount, plus interest, is due on September 30, 2012.

5. At December 31, 2011, $3,000 of previously unearned client fees had been earned.

6. Accrued, but unrecorded and uncollected client fees earned total $690 at December 31, 2011.

7. Accrued, but unrecorded and unpaid salary expense totals $750 at December 31, 2011.

8. Accrued income taxes expense for the entire year ending December 31, 2011, total $7,000.

9. The full amount is due early in 2012.

Instructions
a. Prepare the necessary adjusting journal entries on December 31, 2011. Prepare also an adjusted trial balance dated December 31, 2011.

b. From the adjusted trial balance prepared in part a, prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the company’s balance sheet dated December 31, 2011.

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 down?Explain.

Transcribed Image Text:

BRUSHSTROKE ART STUDIO, INC. UNADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Debits Credits Cash .. Client fees receivable Supplies Prepaid studio rent . . Studio equipment Accumulated depreciation: studio equipment.. . Accounts payable 71,250 6,000 2,500 96,000 52,000 6,420 24,000 480 8,000 5,000 50,000 20,000 82,310 Interest payable Unearned client fees. Income taxes payable Capital stock Client fees earned.. Supplies expense. Salary expense Interest expense Studio rent expense. Utilities expense Depreciation expense: studio equipment Income taxes expense 4,000 480 .11,250 3,300 8,800 5,000 $248,210 $248,210