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Question & Answer: Amber Nestor has an eye for quality. She recently formed an art gallery where she allows artists to displa…..

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 enties 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.

GENERAL JOURNAL Page
Date Accounts Debit Credit
Dec. 31
Dec. 31
Dec. 31
Dec. 31
CASH REVENUES
ACCOUNTS RECEIVABLE
RENT EXPENSE
SUPPLIES
SALARIES EXPENSE
DISPLAY EQUIPMENT
INTEREST EXPENSE
ACCUMULATED DEPRECIATION
UTILITIES EXPENSE
RENT PAYABLE
LOAN PAYABLE
CAPITAL STOCK
AMBER NESTOR ART GALLERY
Adjusted Trial Balance
As of December 31, 20X4
Debits Credits
Cash $                   – $                    –
Accounts receivable                       –                        –
Supplies                       –                        –
Display equipment                       –                        –
Accumulated depreciation                       –                        –
Rent payable                       –                        –
Loan payable                       –                        –
Capital stock                       –                        –
Revenues                       –                        –
Rent expense                       –                        –
Salaries expense                       –                        –
Interest expense                       –                        –
Utilities expense                       –                        –
                      –                        –
                      –                        –
$                   – $                    –

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