Fly Right Travel Agency Ltd. was organized on January 1, 2016, by Joe Paul. Joe is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Joe prepared the following income statement for the fourth quarter, which ended March 31, 2018.

Joe knew that something was wrong with the statement because net income had never exceeded $8,000 in any one quarter. Knowing that you are an experienced accountant, he asks you to review the income statement and other data.
You first look at the trial balance. In addition to the account balances reported above in the income statement, the trial balance contains the following additional selected balances at March 31, 2018.
Supplies..............................$ 2,900
Prepaid insurance..................3,360
Bank loan payable...............12,000
You then make inquiries and discover the following items:
1. Service revenue includes advanced payments for cruises, in the amount of $20,000.
2. There were $800 of supplies on hand at March 31.
3. Prepaid insurance resulted from the purchase of a one-year policy for $3,360 on January 1, 2018.
4. The mail the first week of April brought in a bill for heat, light, and power for the month of March, $210.
5. There are two employees who receive salaries of $100 each per day. At March 31, four days' salaries have been incurred but not paid.
6. The bank loan was signed on January 1, 2018, for seven months, with 7% interest due at maturity, July 31.
7. Income tax of $1,990 for the quarter is due in April.
Instructions
(a) Prepare the adjusting journal entries required at March 31, assuming adjusting entries are made quarterly.
(b) Prepare a correct income statement for the quarter ended March 31, 2018.

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FLY RIGHT TRAVEL AGENCY LTD Income Statement Quarter Ended March 31, 2018 Service revenue Expenses Salaries expense Office expense Advertising expense1,700 Utilities expense Depreciation expense Net income $50,000 $11,000 2,600 400 400 16.100 $33,90o