Problem 3-4 (1)

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 BalanceJune 30, 2014Cash (111)9,812Accounts Receivable (113)14,227Prepaid Rent (117)12,000Prepaid Insurance (118)4,900Prepaid Maintenance (119)12,000Spare Parts (140)11,310Limousines (148)200,000Accumulated Depreciation - Limousines (149)25,000Notes Payable (211)45,000Unearned Passenger Service Revenue (212)30,000Common Stock (311)30,000Retained Earnings (312)48,211Dividends (313)20,000Passenger Service Revenue (411)428,498Gas and Oil Expense (510)89,300Salaries Expense (511)206,360Advertising Expense (513)26,800606,709606,709The following information is also available:

1. To obtain space at the airport, Kitz paid two years' rent in advance when it began the business.
2. An examination of insurance policies reveals that $2,800 expired during the year.
3. 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.
4. An inventory of spare parts shows $1,902 on hand.
5. Kitz depreciates all of its limousines at the rate of 12.5 percent per year. No limousines were purchased during the year.
6. A payment of $1,500 for one full year's interest on notes payable is now due.
7. 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.
8. 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 JOURNALPAGE 14DATEDESCRIPTIONPOST. REF.DEBITCREDIT2014Jun. 30Select

Cash

Rent Payable

Rent Revenue

Prepaid Rent

Rent Expense

Item 1

Select

Cash

Rent Payable

Rent Revenue

Prepaid Rent

Rent Expense

Item 4

To expense second year's rent paid in advanceJun. 30Select

Cash

Insurance Payable

Insurance Revenue

Prepaid Insurance

Insurance Expense

Item 7

Select

Cash

Insurance Payable

Insurance Revenue

Prepaid Insurance

Insurance Expense

Item 10

To record insurance that expired during the yearJun. 30Select

Cash

Maintenance Payable

Maintenance Revenue

Prepaid Maintenance

Maintenance Expense

Item 13

Select

Cash

Maintenance Payable

Maintenance Revenue

Prepaid Maintenance

Maintenance Expense

Item 16

To record amount of deposit used during the yearJun. 30Select

Cash

Spare Parts Payable

Spare Parts Revenue

Spare Parts Expense

Spare Parts

Item 19

Select

Cash

Spare Parts Payable

Spare Parts Revenue

Spare Parts Expense

Spare Parts

Item 22

To record spare parts used during the yearJun. 30Select

Cash

Limousines

Limousines Expense

Accumulated Depreciation-Limousines

Depreciation Expense-Limousines

Item 25

Select

Cash

Limousines

Limousines Expense

Accumulated Depreciation-Limousines

Depreciation Expense-Limousines

Item 28

To record depreciation on the limousines for the yearJun. 30Select

Cash

Interest Revenue

Prepaid Interest

Interest Expense

Interest Payable

Item 31

Select

Cash

Interest Revenue

Prepaid Interest

Interest Expense

Interest Payable

Item 34

To record accrued interestJun. 30Select

Cash

Passenger Service Revenue Payable

Passenger Service Revenue Receivable

Passenger Service Revenue

Unearned Passenger Service Revenue

Item 37

Select

Cash

Passenger Service Revenue Payable

Passenger Service Revenue Receivable

Passenger Service Revenue

Unearned Passenger Service Revenue

Item 40

To recognize passenger service revenue earnedJun. 30Select

Cash

Interest Expense

Income Taxes Expense

Income Taxes Payable

Income Taxes Revenue

Item 43

Select

Cash

Interest Expense

Income Taxes Expense

Income Taxes Payable

Income Taxes Revenue

Item 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.

GENERAL LEDGERACCOUNTCashACCOUNT NO.111BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 49

ACCOUNTAccounts ReceivableACCOUNT NO.113BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 54

ACCOUNTPrepaid RentACCOUNT NO.117BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 59

Jun. 30Select

Balance

Adjustment

Item 64

ACCOUNTPrepaid InsuranceACCOUNT NO.118BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 70

Jun. 30Select

Balance

Adjustment

Item 75

ACCOUNTPrepaid MaintenanceACCOUNT NO.119BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 81

Jun. 30Select

Balance

Adjustment

Item 86

ACCOUNTSpare PartsACCOUNT NO.140BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 92

Jun. 30Select

Balance

Adjustment

Item 97

ACCOUNTLimousinesACCOUNT NO.148BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 103

ACCOUNTAccumulated DepreciationLimousinesACCOUNT NO.149BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 108

Jun. 30Select

Balance

Adjustment

Item 113

ACCOUNTNotes PayableACCOUNT NO.211BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 119

ACCOUNTUnearned Passenger Service RevenueACCOUNT NO.212BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 124

Jun. 30Select

Balance

Adjustment

Item 129

ACCOUNTInterest PayableACCOUNT NO.213BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 135

ACCOUNTIncome Taxes PayableACCOUNT NO.214BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 141

Jun. 30Select

Balance

Adjustment

Item 146

ACCOUNTCommon StockACCOUNT NO.311BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 152

ACCOUNTRetained EarningsACCOUNT NO.312BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 157

ACCOUNTDividendsACCOUNT NO.313BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 162

ACCOUNTPassenger Service RevenueACCOUNT NO.411BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 167

Jun. 30Select

Balance

Adjustment

Item 172

ACCOUNTGas and Oil ExpenseACCOUNT NO.510BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 178

ACCOUNTSalaries ExpenseACCOUNT NO.511BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 183

ACCOUNTAdvertising ExpenseACCOUNT NO.513BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 188

ACCOUNTRent ExpenseACCOUNT NO.514BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 193

ACCOUNTInsurance ExpenseACCOUNT NO.515BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 199

ACCOUNTSpare Parts ExpenseACCOUNT NO.516BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 205

ACCOUNTDepreciation ExpenseLimousinesACCOUNT NO.517BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 211

ACCOUNTMaintenance ExpenseACCOUNT NO.518BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 217

ACCOUNTInterest ExpenseACCOUNT NO.519BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 223

ACCOUNTIncome Taxes ExpenseACCOUNT NO.520BALANCEDATEITEMPOST. REF.DEBITCREDITDEBITCREDIT2014Jun. 30Select

Balance

Adjustment

Item 229

Jun. 30Select

Balance

Adjustment

Item 234

Problem 3-4 (1) Determining Adjusting Entries and 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 a. b. c. d. e. f. g. h. 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 DATE DESCRIPTION 2014 Jun. 30 Select Select To expense second year's rent paid in advance Jun. 30 Select POST. REF. DEBIT Select To record insurance that expired during the year Jun. 30 Select Select To record amount of deposit used during the year Jun. 30 Select Select To record spare parts used during the year Jun. 30 Select Select To record depreciation on the limousines for the year Jun. 30 Select Select To record accrued interest Jun. 30 Select Select To recognize passenger service revenue earned Jun. 30 Select Select 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); Rent Expense (514); Insurance Expense (515); Spare Parts Expense (516); Depreciation ExpenseLimousines (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. GENERAL LEDGER ACCOUNT Cash ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Accounts Receivable ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Prepaid Rent ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Prepaid Insurance ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Prepaid Maintenance ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Spare Parts ACCOUNT NO BA DATE ITEM 2014 Jun. 30 Select POST. REF. DEBIT CREDIT DEBIT Jun. 30 ACCOUNT Select Limousines ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Accumulated DepreciationLimousines ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Notes Payable ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Unearned Passenger Service Revenue ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Interest Payable ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Income Taxes Payable ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Common Stock ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Retained Earnings ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Dividends ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Passenger Service Revenue ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 Select Jun. 30 Select ACCOUNT Gas and Oil Expense ACCOUNT NO BA DATE 2014 ITEM POST. REF. DEBIT CREDIT DEBIT Jun. 30 ACCOUNT Select Salaries Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Advertising Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Rent Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Insurance Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Spare Parts Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Depreciation ExpenseLimousines ACCOUNT NO BA DATE 2014 ITEM POST. REF. DEBIT CREDIT DEBIT Jun. 30 ACCOUNT Select Maintenance Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Interest Expense ACCOUNT NO BA DATE ITEM POST. REF. DEBIT CREDIT DEBIT 2014 Jun. 30 ACCOUNT Select Income Taxes Expense ACCOUNT NO BA DATE ITEM 2014 Jun. 30 Select Jun. 30 Select POST. REF. DEBIT CREDIT DEBIT