Refer to the information provided for Four Star Video in Problem 4-9.

Data from 4-9

Four Star Video has been in the video rental business for five years. An unadjusted trial balance at May 31, 2014, follows.

The following additional information is available:
a. Four Star rents a store in a shopping mall and prepays the annual rent of $7,200 on April 1 of each year.
b. The asset account Video Inventory represents the cost of videos purchased from suppliers. When a new title is purchased from a supplier, its cost is debited to this account. When a title has served its useful life and can no longer be rented (even at a reduced price), it is removed from the inventory in the store. Based on the monthly count, the cost of titles on hand at the end of May is $23,140.
c. The display stands have an estimated useful life of five years and an estimated salvage value of $500.
d. Wages and salaries owed but unpaid to employees at the end of May amount to $1,450.
e. In addition to individual rentals, Four Star operates a popular discount subscription program. Customers pay an annual fee of $120 for an unlimited number of rentals. Based on the $10 per month earned on each of these subscriptions, the amount earned for the month of May is $2,440.
f. Four Star accrues income taxes using an estimated tax rate equal to 30% of the income for the month.

Required
Prepare a table to summarize the required adjusting entries as they affect the accounting equation. Use the format in Exhibit 3-1 on page 109. Identify each adjustment by letter.

Transcribed Image Text:

Four Star Video Unadjusted Trial Balance May 31, 2014 Debit Credit $ 4,000 Cash Prepaid Rent Video Inventory Display Stands Accumulated Depreciation Accounts Payable Customer Subscriptions Capital Stock Retained Earnings 6,600 25,600 8,900 $ 5,180 3,260 4,450 5,000 22,170 Rental Revenue 9,200 Wage and Salary Expense Utilities Expense Advertising Expense 2,320 1,240 600 $49,260 Totals $49,260