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.
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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…..
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|AMBER NESTOR ART GALLERY|
|As of December 31, 20X4|
|Cash||$ 18,400||$ –|
|$ 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.