Question
DeterminingAdjusting Entriesand Tracing Their Effects to Financial Statements Kitz Limo Service, Inc., was organized to provide limousine service between the airport and various suburban locations.
DeterminingAdjusting Entriesand Tracing Their Effects to Financial Statements
Kitz Limo Service, Inc., was organized to provide limousine service between the airport and various suburban locations. It has just completed its second year of business. Its trial balance follows.
Kitz Limo Service, Inc. | |||
Trial Balance | |||
June 30, 2014 | |||
Cash (111) | 9,812 | ||
Accounts Receivable (113) | 14,227 | ||
Prepaid Rent (117) | 12,000 | ||
Prepaid Insurance (118) | 4,900 | ||
Prepaid Maintenance (119) | 12,000 | ||
Spare Parts (140) | 11,310 | ||
Limousines (148) | 200,000 | ||
Accumulated Depreciation - Limousines (149) | 25,000 | ||
Notes Payable (211) | 45,000 | ||
Unearned Passenger Service Revenue (212) | 30,000 | ||
Common Stock (311) | 30,000 | ||
Retained Earnings (312) | 48,211 | ||
Dividends (313) | 20,000 | ||
Passenger Service Revenue (411) | 428,498 | ||
Gas and Oil Expense (510) | 89,300 | ||
Salaries Expense (511) | 206,360 | ||
Advertising Expense (513) | 26,800 | ||
606,709 | 606,709 |
The following information is also available:
- To obtain space at the airport, Kitz paid two years' rent in advance when it began the business.
- An examination of insurance policies reveals that $2,800 expired during the year.
- To provide regular maintenance for the vehicles, Kitz deposited $12,000 with a local garage. An examination of maintenance invoices reveals charges of $10,944 against the deposit.
- An inventory of spare parts shows $1,902 on hand.
- Kitz depreciates all of its limousines at the rate of 12.5 percent per year. No limousines were purchased during the year.
- A payment of $1,500 for one full year's interest on notes payable is now due.
- Unearned Passenger Service Revenue on June 30 includes $17,815 for tickets that employers purchased for use by their executives but which have not yet been redeemed.
- Federal income taxes for the year are estimated to be $13,250.
1. Determine adjusting entries and enter them in the general journal (Page 14). Enter the adjusting entries in the order shown above (a through h) in the additional information section. Include the Post. Ref. column and fill in using the account numbers listed in the question.
GENERAL JOURNAL | PAGE 14 | |||
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT |
2014 | ||||
Jun. 30 | SelectCashRent PayableRent RevenuePrepaid RentRent ExpenseItem 1 | |||
SelectCashRent PayableRent RevenuePrepaid RentRent ExpenseItem 4 | ||||
To expense second year's rent paid in advance | ||||
Jun. 30 | SelectCashInsurance PayableInsurance RevenuePrepaid InsuranceInsurance ExpenseItem 7 | |||
SelectCashInsurance PayableInsurance RevenuePrepaid InsuranceInsurance ExpenseItem 10 | ||||
To record insurance that expired during the year | ||||
Jun. 30 | SelectCashMaintenance PayableMaintenance RevenuePrepaid MaintenanceMaintenance ExpenseItem 13 | |||
SelectCashMaintenance PayableMaintenance RevenuePrepaid MaintenanceMaintenance ExpenseItem 16 | ||||
To record amount of deposit used during the year | ||||
Jun. 30 | SelectCashSpare Parts PayableSpare Parts RevenueSpare Parts ExpenseSpare PartsItem 19 | |||
SelectCashSpare Parts PayableSpare Parts RevenueSpare Parts ExpenseSpare PartsItem 22 | ||||
To record spare parts used during the year | ||||
Jun. 30 | SelectCashLimousinesLimousines ExpenseAccumulated Depreciation-LimousinesDepreciation Expense-LimousinesItem 25 | |||
SelectCashLimousinesLimousines ExpenseAccumulated Depreciation-LimousinesDepreciation Expense-LimousinesItem 28 | ||||
To record depreciation on the limousines for the year | ||||
Jun. 30 | SelectCashInterest RevenuePrepaid InterestInterest ExpenseInterest PayableItem 31 | |||
SelectCashInterest RevenuePrepaid InterestInterest ExpenseInterest PayableItem 34 | ||||
To record accrued interest | ||||
Jun. 30 | SelectCashPassenger Service Revenue PayablePassenger Service Revenue ReceivablePassenger Service RevenueUnearned Passenger Service RevenueItem 37 | |||
SelectCashPassenger Service Revenue PayablePassenger Service Revenue ReceivablePassenger Service RevenueUnearned Passenger Service RevenueItem 40 | ||||
To recognize passenger service revenue earned | ||||
Jun. 30 | SelectCashInterest ExpenseIncome Taxes ExpenseIncome Taxes PayableIncome Taxes RevenueItem 43 | |||
SelectCashInterest ExpenseIncome Taxes ExpenseIncome Taxes PayableIncome Taxes RevenueItem 46 | ||||
To record estimated income taxes |
2. Open ledger accounts for the accounts in the trial balance plus the following: Interest Payable (213); Income Taxes Payable (214); RentExpense(514); Insurance Expense (515); Spare Parts Expense (516);DepreciationExpenseLimousines (517); Maintenance Expense (518); Interest Expense (519) and Income Taxes Expense (520). Record the balances shown in the trial balance.
3. Post the adjusting entries from the general journal to the ledger accounts, showing proper references. If an amount box does not require an entry, leave it blank.
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