Jassal Music Inc. is located in Edmonton, Alberta, and reports its financial information using IFRS. You were recently hired as the company’s chief accountant to fill a long-standing vacancy. Your review of the accounting records for the year ended December 31, 20X4, has uncovered the following transactions:
1. Jassal renewed the commercial and business insurance policy in August 20X4 for the year commencing September 1, 20X4. The company recorded the $25,500 payment as a prepaid expense.
2. The company rents instruments to schools and has contracts with customers in the school rental program that run for the full academic year (September to June). Customers pay the yearly fee in advance for the instrument rentals. In September 20X4, the company received $80,000 cash and recorded it as rental income.
3. On January 1, 20X4, Jassal received an $18,000, 0% note receivable from Ryan Tower Inc., in exchange for a delivery vehicle Jassal no longer needed. Ryan Tower is repaying the note in three equal instalments of $6,000, with the first payment due January 1, 20X5. The market rate of interest when the note was received was 5% per annum. The sale of the vehicle was correctly recorded.
4. During the 20X4 fiscal year, Jassal sold a violin that usually retails for $1,650 from its inventory of new instruments. In exchange, Jassal received a computer system that normally sells for its fair value of $1,800. The cost of the violin was $1,500. The transaction has not yet been recorded.
Prepare year-end adjusting entries for transactions 1 to 3 and the required entry for transaction 4.
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