Reference no: EM132545678

Arif Khan's Air Service operates several small airplanes providing passenger and freight service to small towns, oil fields, fishing lodges, and other remote locations in Delhi. The company adjusts and closes its accounts at the end of each month. At April 30, the following trial balance was prepared from the ledger:

Arif Khan Air Service

Trial Balance

April 30, 2009

Cash ..................................................... Rs 22750

Accounts receivable....................................... 28300

Prepaid rent................................................. 8100

Unexpired Insurance..................................... 36900

Airplanes.................................................... 855000

Accumulated depreciation: airplanes................................... Rs 232750

Notes Payable............................................................ 450000

Unearned Passenger revenue.............................................175250

Arif Khan, capital...................................................... 171750

Arif Khan, drawing..........................................7750

Freight revenue......................................................... 54250

Fuel expense..................................................47600

Salaries expense.............................................70900

Maintenance expense....................................... 6700

Rs108400 Rs 1084000

Other Data:

a. One of Arif's regular customers is Hermain Oil Company. The airline keeps track of the number of trips carrying freight for the oil company and sends a bill shortly after month-end. No entry has yet been made in the airline's accounting record $11,750 freight revenue earned in April from Hermain Oil Company.

b. Three months' rent ($8,100) had been prepaid on April 1.

c. On January 1, a 12 month insurance policy had been purchased for $49,200.

d. Arif Khan's depreciates its airplanes over a period of 15 years (180 months)

e. Accrued interest on notes payable amounts to $4500 at April 30 and has not yet been recorded.

f. The amount shown as unearned passenger revenue represents the price of tickets sold to customers in advance of flights. During April, $94750 of this amount was earned by the airline. (Credit Passenger Revenue)

g. Salaries earned by airline employees but not yet recorded or paid amount to $1625 at April 30.

Instructions:

Question a) Briefly explain the following concepts in relation to adjusting entries

1. Prepaid expenses;

2. Unearned revenues;

3. Accrued expenses; and

4. Accrued revenues

Question b) Prepare the Adjusting entries required at April 30, 2009?