The Starr Theater Question [PDF]

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The Starr Theater, owned by Meg Vargo, will begin operations in March. The Starr will be unique in that it will show only triple features of sequential theme movies. As of March 1, the ledger of Starr showed: No. 101 Cash $3,000, No. 140 Land $24,000, No. 145 Buildings (concession stand, projection room, ticket booth, and screen) $10,000, No. 157 Equipment $10,000, No. 201 Accounts Payable $7,000, and No. 301 Owner’s Capital $40,000. During the month of March, the following events and transactions occurred. March 2



Rented the three Indiana Jones movies to be shown for the first 3 weeks of March. The film rental was $3,500; $1,500 was paid in cash and $2,000 will be paid on March 10.



3



Ordered the Lord of the Rings movies to be shown the last 10 days of March. It will cost $200 per night.



9



Received $4,300 cash from admissions.



10



Paid balance due on Indiana Jones movies rental and $2,100 on March 1 accounts payable.



11



Starr Theater contracted with Adam Ladd to operate the concession stand. Ladd is to pay 15% of gross concession receipts, payable monthly, for the rental of the concession stand.



12



Paid advertising expenses $900.



20



Received $5,000 cash from customers for admissions.



20



Received the Lord of the Rings movies and paid the rental fee of $2,000.



31



Paid salaries of $3,100.



31



Received statement from Adam Ladd showing gross receipts from concessions of $6,000 and the balance due to Starr Theater of $900 ($6,000 3 15%) for March. Ladd paid one half the balance due and will remit the remainder on April 5.



31



Received $9,000 cash from customers for admissions.



In addition to the accounts identifi ed above, the chart of accounts includes: No. 112 Accounts Receivable, No. 400 Service Revenue, No. 429 Rent Revenue, No. 610 Advertising Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense. Instructions (a) Enter the beginning balances in the ledger. Insert a check mark (✓) in the reference column of the ledger for the beginning balance. (b) Journalize the March transactions. Starr records admission revenue as service revenue, rental of the concession stand as rent revenue, and fi lm rental expense as rent expense. (c) Post the March journal entries to the ledger. Assume that all entries are posted from page 1 of the journal. (d) Prepare a trial balance on March 31, 2017.



Answers : (a) Enter the beginning balances in the ledger. Insert a check mark (✓) in the reference column of the ledger for the beginning balance. (c) Post the March journal entries to the ledger. Assume that all entries are posted from page 1 of the journal. Cash



No. 101



Date



Explanation



March 1



Balance



Ref.



Debit



Credit







Balance 3,000



2



101



1,500



9



101



10



101



4,100



1,700



12



101



900



800



20



101



20



101



2,000



3,800



31



101



3,100



700



31



101



450



1,150



31



101



9,000



10,150 (D)



4,300



1,500 5,800



5,000



5,800



Account Receivable Date Explanation Mar. 31



Ref 112



Debit 450



Credit



No. 112 Balance 450 (D)



Land Date Mar. 1



Explanation Balance



Ref 



Debit



Credit



No. 140 Balance 24,000 (D)



Buildings Date Mar. 1



Explanation Balance



Ref 



Debit



Credit



No. 145 Balance 10,000 (D)



Equipments Date Mar. 1



Explanation Balance



Ref 



Debit



Credit



No. 157 Balance 10,000 (D)



Account Payable Date Mar. 1 2 10 Owner’s Capital Date Mar. 1



Explanation Balance



Explanation Balance



Ref  201 201



Ref 



Debit



Credit 2,000



4,100



Debit



Credit



No. 201 Balance 7,000 9,000 4,900 (K) No. 301 Balance 40,000 (K)



Service Revenue Date Mar. 9 20 31



Explanation



Ref 400 400 400



Debit



Credit 4,300 5,000 9,000



No. 400 Balance 4,300 9,300 18,300 (D)



Explanation



Ref 429



Debit



Credit 900



No. 429 Balance 900 (K)



Advertising Expense Date Explanation Mar. 12



Ref 610



Debit 900



Credit



No. 610 Balance 900 (D)



Salaries and Wages Expense Date Explanation Mar. 31



Ref 726



Debit 3,100



Credit



No. 726 Balance 3,100 (D)



Rent Revenue Date Mar. 31



Rent Expense Date Mar. 2 20



Explanation



Ref 729 729



Debit 3,500 2,000



Credit



No. 729 Balance 3,200 5,500 (D)



(b) Journalize the March transactions. Date



Ref



Debit



729 201 101



3,500



3



Rent Expense Accounts Payable Cash No entry



9



Cash



101 400 201 101



4,300



610 101 101 400 729 101 726 101 101 112 429



900



March 2



10 11 12 20 20 31 31



31



Account



Service Revenue Accounts Payable Cash No entry. Advertising Expense Cash Cash Service Revenue Rent Expense Cash Salaries and Wages Expense Cash Cash Accounts Receivable Rent Revenue (15% x 6,000) Cash Service Revenue



101 400



Kredit



2,000 1,500



4,300 4,100 4,100



900 5,000 5,000 2,000 2,000 3,100 3,100 450 450 900 9,000 32,800



9,000 32,800



(d) Prepare a trial balance on March 31, 2017. STARR THEATER Trial Balance March 31, 2017 Account Cash Accounts Receivable Land Buildings Equipment Accounts Payable Owner’s Capital Service Revenue Rent Revenue Advertising Expense Salaries and Wages Expense Rent Expense



Debit 10,150 450 24,000 10,000 10,000



Credit



4,900 40,000 18,300 900 900 3,100 5,500 64,100



64,100