Question

"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. (a) Prepare the necessary adjusting entries as of December 31, 20X4.

	GENERAL JOURNAL				Page
	Date	Accounts		Debit	Credit
	Dec. 31
	Dec. 31
	Dec. 31
	Dec. 31

Answer 1

Solution:

General Journal			Page
Date	Accounts	Debit	Credit
Dec. 31	Depreciation Expense[15000/3]	$    5,000
	Accumulated Depreciation- Machinery		$    5,000
	(To record depreciation expense)
Dec. 31	Accounts Receivables	$ 17,900
	Commission Revenue		$ 17,900
	(To record commission earned)
Dec. 31	Supplies Expenses[6790-3400]	$    3,390
	Supplies		$    3,390
	(To record supplies expense)
Dec. 31	Rent Expense	$    1,000
	Rent Payable/Accounts Payable		$    1,000
	(To record rent payable recorded)