Priced Right (PR) maker of Sandy paper products, decided to hold a managers' meeting in Hawaii in January To take advantage of special fares, PR purchased airline tickets in advance from Air True Airlines at a total cost of $50,000. These were acquired on August 1 for cash.

Requirements

1. By using the balance sheet equation format, analyze the impact of the August payment and the January travel on the financial position of both PR and Air True.

2. Also prepare journal entries forJanuary for both companies.

Requirement 1. By using the balance sheet equation format, analyze the impact of the

August payment and the January travel on the financial position of both PR and Air True.

(Use parentheses or a minus sign to show a decrease in the accounting equation component. Leave any unused cells blank.)

Enter the transactions into the equation one transaction at a time, beginning with the August payment on the books of PR first.

Assets			=	Liabilities	+	Stockholders' Equity
			Prepaid		Unearned		Sales		Travel
	Cash		Travel Expense	=	Sales Revenue		Revenue		Expense
August payment				=

January travel

=

Next, enter the transactions into the equation on the books of Air True Airlines, beginning with the August payment.

	Assets			=	Liabilities	+	Stockholders' Equity
			Prepaid		Unearned		Sales		Travel
	Cash		Travel Expense	=	Sales Revenue		Revenue		Expense
August payment				=

January travel

=

Requirement 2. Prepare journal entries for January for both companies. (Record debits first, then credits. Explanations are not required.)

Begin by preparing the adjusting journal entry for PR.

Date		Accounts	Debit	Credit
January 31

Next prepare the adjusting journal entry for

Air TrueAir True.

Date		Accounts	Debit	Credit
January 31