ACC 1100 Introductory Financial Accounting

Days 6&7 Adjusting Entry

Columbia Flying Service
Unadjusted Trial Balance
As at December 31, 2020
Debit Credit
Cash $61,500
Accounts receivable 45,000
Supplies inventory 2,000
Equipment 42,000
Equipment, accumulated depreciation $6,000
Planes 216,000
Planes, accumulated depreciation 71,000
Prepaid insurance 34,000
Accounts payable 8,000
Deferred revenue (lessons) 28,000
Notes payable 60,000
Common shares 10,000
Retained earnings 78,100
Revenues from lessons 895,000
Revenues from charters 156,000
Salaries expense 623,000
Fuel expense 189,000
Maintenance expense 51,000
Supplies expense 6,000
Insurance expense 15,000
Advertising expense 13,000
Rent expense 11,000
Interest expense 2,400
Licences and fees 1,200
$1,312,100 $1,312,100
The following information is also available:

1) Instructor salaries for the last week of December, 2020, have not yet been
recorded. They will be payable the first week of the New Year. Salaries for the
one week are $15,500.
2) In the course of the last two weeks of December, 2020, lessons were given that
had been paid for in advance (deferred revenue). The amount charged for the
lessons was $16,500. No accounting recognition has yet been given for the
service provided.
3) No depreciation has been recorded in 2020. The useful life of the planes is
estimated at 10 years (no salvage value) and that of the equipment at 7 years
(also no salvage value).
4) Rent for December, $1,000, has not yet been paid and recorded.
5) The company purchases a one-year insurance policy each year which takes
effect on July 1. The entire cost of the current year’s policy (July 1, 2020 to
June 30, 2021) has been charged (debited) to “Prepaid insurance”. No entries
to the “Insurance expense” have been made since July 1, 2020.
6) Interest on the $60,000 note payable outstanding is payable twice each year,
April 1 and October 1. The annual rate of interest is 8 percent. The note was
issued on April 1, 2020. The amount of interest expense represents the first
interest payment, which was made on October 1.
7) All purchases of supplies are charged (debited) to “Supplies expense”. The
balance in “Supplies inventory” represents supplies on hand at the beginning of
the year. A physical count on December 31, 2020, indicated supplies currently
on hand of $4,000.
8) On December 29, the company flew a charter for which it has not yet billed the
customer and which it has not yet recorded in the accounts. The customer will
be charged $6,800.
9) Based on preliminary computations, the firm estimates that income tax expense
for year 2020 will be $22,000.

Required

a. Prepare all journal entries that would be necessary to adjust and bring the
accounts up to date. (Add any additional account titles that you believe to be
necessary.)
b. Prepare all the financial statements except the statement of cash flows for
the year ending December 31, 2020.