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Problem 1 (17 points) On 2 May 2017, John Smith began a new business, called Music Inc., a recording studio to be rented out to artists on an hourly or daily basis. The following six transactions were completed by the business during May 2 May Issued to Smith 15,000 shares of capital stock in exchange for his investment of $280,000 cash. 6 May Purchased land and a building for $540,000, paying $100,000 cash and signing a note payable for the balance. The land was considered to be worth $360,000 and the building $180,000. 9 May Installed special insulation and soundproofing throughout most of the building at a cost of $180,000. Paid $80,000 cash and agreed to pay the balance in 60 days. Smith considers these items to be additional costs of the building. 12 May Purchased office furnishings costing $18,600 and recording equipment costing $60,200 from Sounds Supplies. Paid $28,000 cash with the balance due in 30 days. 26 May Paid the full amount of the liability to Sounds Supplies arising from the purchases on 12 May above. 28 May Billed customers $32,600 for services performed. The account titles used by Music Inc. are as follows: Cash V Accounts Payable Accounts Receivable Building 1 Service Revenue Office Furnishings Capital Stock Recording Equipment Notes Payable int of $ Date Account Titles and Explanation Debit Credit gning $180, tag ese $60. 2

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