The following trial balance and additional data are for South Sea Tours, Inc.:
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SOUTH SEA TOURS, INC. |
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|
Debits |
Credits |
|
|
Cash |
$109,050 |
|
|
Accounts Receivable |
133,750 |
|
|
Prepaid Insurance |
4,350 |
|
|
Prepaid Advertising |
18,000 |
|
|
Notes Receivable |
11,250 |
|
|
Land |
90,000 |
|
|
Buildings |
165,000 |
|
|
Accumulated Depreciation—Buildings |
$49,500 |
|
|
Office Equipment |
83,400 |
|
|
Accumulated Depreciation—Office Equipment |
16,680 |
|
|
Accounts Payable |
56,850 |
|
|
Notes Payable |
75,000 |
|
|
Capital Stock |
240,000 |
|
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Retained Earnings, 2010 January 1 |
47,820 |
|
|
Dividends |
30,000 |
|
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Service Revenue |
368,350 |
|
|
Salaries Expense |
96,000 |
|
|
Travel Expense |
111,000 |
|
|
Interest Revenue |
600 |
|
|
Interest Expense |
3,000 |
|
|
$854,800 |
$854,800 |
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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 USD 450.
Accrued interest on the notes payable is USD 1,000.
Accrued salaries are USD 2,100.
Expired prepaid insurance is USD 3,750.
Expired prepaid advertising is USD 16,500.
a. Prepare a 12-column work sheet for the year ended 2010 December 31. 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.