Question

Prepare adjusting Entries question;

9.

The King Street Zoo operates a drive-through tourist attraction in Toronto. The company adjusts its accounts at the end of each month. The selected accounts appearing below reflect balances after adjusting entries were prepared on April 30. The adjusted trial balance shows the following:

Prepaid Rent..................................................................	$12,000
Feed Shed......................................................................	40,000
Accumulated Depreciation—Feed Shed.......................	6,000
Unearned Revenue........................................................	500

Other data:

Four months rent had been prepaid on April 1.

The feed shed is being depreciated at $7,200 per year.

The unearned revenue represents tickets sold for future zoo visits. The tickets were sold at $4.00 each on April 1. During April, twenty-five of the tickets were used by customers.

Instructions

Prepare the three adjusting entries that were made by the King Street Zoo on April 30

Answer 1

Explanation:-
1). Prepaid Rent is $12000 after adjusting entry.
As the rent is paid in advance for 4 months, the balance in prepaid rent is for 3 months.
Rent per month = $12000 / 3 = $4000
It means Prepaid rent on Apr 1 = $16000
Charged to Rent expense in April month = $4000
Balance in Prepaid rent account on Apr 30 = $12000

2). Depreciation per year = $7200
Depreciation per month = $7200 / 12 = $600

3). Tickets are sold in advance means sold on April 1.
That means all of revenue on April 1 is unearned revenue.
During April 25 tickets used by customers i.e 25 * $4 = $100
Hence this revenue is tfd from unearned revenue to revenue income.
Else balance of receipts from tickets sold on April 1 remains unearned.