Reference no: EM131225202

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?