Amber Nestor has an eye for quality. She recently formed an art gallery where she allows artists to display their artwork for sale. Customers buy the artwork through the gallery, but payments are actually made payable directly to the originating artist. Artists, in turn, pay Amber a 20% commission that is appropriately reflected as revenue of the gallery.

Following is Amber's trial balance after the first year of operation. This trial balance does not reflect the adjustments that are necessary, as described by the additional information.

	AMBER NESTOR ART GALLERY
	Trial Balance
	As of December 31, 20X4
			Debits		Credits
		Cash	$ 18,400		$ -
		Supplies	6,790		-
		Display equipment	15,000		-
		Loan payable	-		7,500
		Capital stock	-		25,000
		Revenues	-		48,590
		Rent expense	11,000		-
		Salaries expense	24,000		-
		Interest expense	500		-
		Utilities expense	5,400		-
			$ 81,090		$ 81,090
The Display equipment was purchased near the beginning of the year. It has a 3-year life and no salvage value. Its cost should be depreciated equally over its life.
Amber is entitled to receive $17,900 of commissions for art sold. This revenue has not yet been recorded, but it is fully expected that the artists will soon be making payment.
Supplies on hand at year end were counted, and amount to $3,400.
December's rent of $1,000 has not yet been paid.
		Required
(a) Prepare the necessary adjusting entries as of December 31, 20X4.
(b) Use T-accounts to determine the adjusted balances of the accounts.
(c) Prepare the adjusted trial balance for Amber Nestor.

Answer rating: 100% (QA)

ANSWER a Adjusting Entries Account Debit Credit Depreciation expense 5000 Accumulated depreciation 5... View the full answer