The following is Ortega Limo Service Ltd.'s unadjusted trial balance at its year end, December 31. The
Question:
The following is Ortega Limo Service Ltd.'s unadjusted trial balance at its year end, December 31. The company adjusts its accounts annually.
Additional information:
1. The insurance policy has a one-year term beginning March 1.
2. A physical count of supplies at December 31 shows $570 of supplies on hand.
3. The vehicles were purchased on January 2, 2011, and have an estimated useful life of four years.
4. The furniture was purchased on July 2, 2009, and has an estimated useful life of 10 years.
5. Service revenue earned but not billed or recorded at December 31 is $1,750.
6. Interest on the 7% bank loan is paid on the first day of each quarter (January 1, April 1, July 1, and October 1).
7. One of Ortega's customers paid in advance for a six-month contract at the rate of $600 per month. The contract began on November 1 and Ortega credited Unearned Revenue at the time.
8. Drivers' salaries total $230 per day. At December 31, three days of salaries are unpaid.
9. On November 1, Ortega paid $1,150 for November and December 2012 rent in advance.
10. Income tax for the year is estimated to be $850. The company has paid $450 in income tax instalments to date.
Instructions
(a) Prepare T accounts and enter the trial balance amounts.
(b) Prepare and post the adjusting journal entries required at December 31.
(c) Prepare an adjusted trial balance at December 31, 2012.
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine