Highland Theatre is owned by Finnean Ferguson. At June 30, 2014, the ledger showed the following: Cash,

Question:

Highland Theatre is owned by Finnean Ferguson. At June 30, 2014, the ledger showed the following:

Cash, $6,000; Land, $100,000; Buildings, $80,000; Equipment, $25,000; Accounts Payable, $5,000; Mortgage Payable, $125,000; and F. Ferguson, Capital, $81,000. During July, the following events and transactions occurred:

July 2 Paid film rental of $800 on first movie to run in July.

2 Paid advertising expenses, $620.

3 Ordered two additional films at $750 each.

5 Highland Theatre contracted with Seibert Company to operate a concession stand. Seibert agreed to pay

Highland Theatre 20% of gross concession receipts, payable monthly, for the right to operate the concession stand.

10 Received $1,950 cash from admissions.

11 Paid $2,000 of the mortgage principal. Also paid $500 interest on the mortgage.

12 Paid $350 cash to have the projection equipment repaired.

16 Paid $2,800 of the accounts payable.

19 Received one of the films ordered on July 3 and was billed $750. Th e fi lm will be shown in July.

29 Received $3,500 cash from customers for admissions.

30 Paid Finnean Ferguson $1,200 for his personal use.

30 Prepaid a $700 rental on a special fi lm to be shown in August.

31 Paid salaries, $1,900.

31 Received a statement from Seibert. It shows gross concession receipts of $2,600 and a balance due to Highland Theatre of $520 ($2,600 × 20%) for July. Seibert paid one half of the balance due and will pay the rest on August 5.

In addition to the accounts identified above, Highland Theatre's ledger includes the following: Accounts Receivable; Prepaid Film Rental; F. Ferguson, Drawings; Admission Revenue; Concession Revenue; Advertising Expense;

Film Rental Expense; Repairs Expense; Salaries Expense; and Interest Expense.

Instructions

(a) Journalize the July transactions.

(b) Enter the beginning balances in the ledger as at June 30. 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 2014.

TAKING IT FURTHER A friend of yours is considering buying Highland 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.

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Related Book For  answer-question

Accounting Principles Part 1

ISBN: 978-1118306789

6th Canadian edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow

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