Case Problem

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On April 1, 2008, Lynn Garcia began her business, called Lynn’s Music

Studio. All of the daily activities for the month of April—including entering

and paying bills, writing checks, recording of sales (both cash and on account),

collection of receivables, and depositing receipts—have been recorded. It is

the end of the first month of business; the adjusting journal entries need to be

recorded, and financial statements need to be printed. You will record the

adjusting journal entries for April 30 using the information provided below.

The company file includes the beginning information for Lynn’s Music

Studio along with the transactions recorded in chapters 2 and 3.

1. Open the company file CH4 Lynn’s Music Studio.QBW.

2. Make a backup copy of the company file LMS4 [Your Name] Lynn’s

Music Studio.

3. Restore the backup copy of the company file. In both the Open and

Restore To windows, use the file name LMS4 [Your Name] Lynn’s

Music Studio.

4. Change the company name to LMS4 [Your Name] Lynn’s Music

Studio.

5. Add the following accounts to the Chart of Accounts List:

Type: Expense

Number: 6300

Name: Music Supplies Expense

chapter4 4/18/07 3:19 PM Page 4-27

PROGRESS CHECK

4-28 CHAPTER 4

Type: Expense

Number: 6325

Name: Office Supplies Expense

Delete the following account:

Advertising Expense

6. Display and print the Trial Balance Report before preparing the adjusting

journal entries. (April 1, 2008–April 30, 2008)

7. Use the information below to prepare adjusting journal entries. Record

each adjusting journal entry separately, and use April 30, 2008, for the

date.

a. The prepaid insurance represents a 1-year policy. Record insurance

expense for 1 month. Refer to the trial balance to determine the

amount in the Prepaid Insurance account. For the Entry No., use

AJE1.

b. Monthly depreciation on the assets: $60 for the Music Instruments,

$40 for the Furniture, and $35 for the Computers. Record each

depreciation expense as a separate adjusting journal entry.

c. The music supplies on hand total $430. Compare to the amount in

the Music Supplies account to determine how much of the music

supplies has been used, and then record the music supplies expense.

d. The office supplies on hand total $300. Compare to the amount in

the Office Supplies account to determine how much of the office

supplies has been used, and then record the office supplies expense.

e. The interest on the note payable for 1 month is $15. Record the

interest expense. Add to the Chart of Accounts list, the Interest

Payable account, Other Current Liability, number 2030.

8. Display and print the following reports for April 30, 2008:

a. Journal report for only the adjusting journal entries. (April 30,

2008–April 30, 2008)

b. Adjusted Trial Balance. Change the name in the header of the report.

(April 1, 2008–April 30, 2008)

c. Profit & Loss Standard (April 1, 2008–April 30, 2008)

d. Balance Sheet Standard (April 30, 2008)

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