Determining Adjusting Entries and Tracing
Their Effects to Financial Statements
Tim Angel opened a small travel agency. At the end of its second year of operation, Angel Travel, Inc., had the trial balance shown below.
Angel Travel, Inc.
Trial Balance
December 31, 2011
| Cash |
$3,650 |
|
| Accounts Receivable |
970 |
|
| Prepaid Insurance |
195 |
|
| Office Supplies |
610 |
|
| Office Equipment |
6,800 |
|
| Accumulated Depreciation-Office Equipment |
|
$670 |
| Accounts Payable |
|
590 |
| Unearned Travel Fees Revenues |
|
315 |
| Common Stock |
|
3,300 |
| Retained Earnings |
|
3,117 |
| Dividends |
4,200 |
|
| Travel Fees Revenue |
|
20,079 |
| Office salaries expense |
8,300 |
|
| Advertising Expense |
585 |
|
| Rent Expense |
2,350 |
|
| Telephone Expense |
411 |
|
|
$28,071 |
$28,071 |
The following information is also available:
a. Office supplies on hand, December 31, 2011, $180.
b. Insurance still unexpired, $65.
c. Estimated depreciation of office equipment, $650.
d. Telephone expense for December, $45; the bill was received but not recorded.
e. The services for all unearned travel fees revenue had been performed by the end of the year.
f. Estimated federal income taxes for the year, $2,385.
REQUIRED
1. Open T accounts for the accounts in the trial balance plus the following: Income Taxes Payable, Insurance Expense, Office Supplies Expense, Depreciation Expense- Office Equipment, and Income Taxes Expense. Record the balances shown in the trial balance.
2. Determine the adjusting entries and post them directly to the T accounts.
3. Prepare an adjusted trial balance, an income statement, a statement of retained earrings, and a balance sheet.
4. Why is it not necessary to show the effects of the above transactions on the statement of cash flows?