Problem 4

The following trial balance and additional data are for Kimball Travel Agency, Inc.:

Kimball Travel Agency, Inc

Trial Balance

31-Dec-14

Debit Credit

Cash $109,050.00

Accounts receivable 133,750.00

Prepaid insurance 4,350.00

Prepaid advertising 18,000.00

Notes receivable 11,250.00

Land 90,000.00

Buildings 165,000.00

Accumulated depreciation - buildings

$49,500.00

Office equipment 83,400.00

Accumulated depreciation - office equipment

16,680.00

Accounts payable

56,850.00

Notes payable

75,000.00

Capital stock

240,000.00

Retained earnings, January 1, 2014

47,820.00

Dividends 30,000.00

Service revenue

368,350.00

Salaries expense 96,000.00

Travel expense 111,000.00

Interest revenue

600.00

Interest expense 3,000.00

$854,800.00 $854,800.00

The company consistently followed the policy of initially debiting all prepaid items to asset

accounts.

The buildings have an expected life of 50 years with no salvage value.

The office equipment has an expected life of 10 years with no salvage value. Accrued interest on

notes receivable is $ 450.

Accrued interest on the notes payable is $ 1,000.

Accrued salaries are $ 2,100.

Expired prepaid insurance is $ 3,750.

Expired prepaid advertising is $ 16,500.

a. Prepare a 12-column work sheet for the year ended December 31, 2014. You need not include

account numbers. Briefly explain the entries in the Adjustments columns at the bottom of the work

sheet, as was done in Exhibit 20.

b. Prepare the required closing entries.