Question

Joe Johns is a commercial pilot and flight instructor with many years of experience. He is also a retired Air Force pilot. He decided to open a new flying service to offer flight training and air charter services.

The adventure began on October 1, 2019. Joe named the new company “Joe Johns Flying Service, Inc.”

He set up a small business corporation and invested $50,000 from his personal savings. He issued himself common stock in the new company. He is the sole stockholder of the corporation.

He bought a used Piper Warrior aircraft for $90,000. He paid the owner a $20,000 down payment and signed a note for the balance. He agreed to make seven annual payments of $10,000 each on the note and that 12% annual interest would accrue on the outstanding principal balance. The first annual payment of principal and interest is due in one year.

Joe purchased a one-year insurance policy on the airplane and the business. He paid $6,000 in advance for the one-year policy.

He rented a hangar space at the local airport for $600 per month. He paid the first month’s rent for October.

The hangar includes a fuel tank, which Joe immediately filled with aviation fuel. The local fixed based operator agreed to give Joe credit with terms of net 30 days and gave Joe an invoice for the fuel $4,500.

Joe immediately signed on two new flying students and after a long weekend of training, he billed them a total of $1,200 for use of the aircraft and flight instruction.

He also flew a business passenger and his wife up to Little Rock, Arkansas and back. The passenger paid in full $3,500.

On the way back from Little Rock, Joe hit a bird and it cracked the windshield, which he paid a local repairman $1,100 to replace.

Joe realized it is a slow first month, but he wants to get off to the right start with his accounting. He has hired you to set up his books and to do the financial statements for the first month, October 2019.

Your instructions are as follows.

Set up a chart of accounts for Joe Johns Flying Service, Inc.

Record the transactions in the form of journal entries.

Post the transactions in the ledger accounts. You can use T-accounts.

Prepare a trial balance.

Now, make the necessary adjusting entries as of Oct. 31.

Joe tells you that he has used up half of the fuel in the tank.

Accrue one month’s interest on the note.

Depreciate the airplane using the straight-line method. Give it a ten- year life with no salvage value.

Prepare the adjusting journal entries.

Post the adjusting entries to the ledger (T-accounts).

Prepare an adjusted trial balance.

Prepare the Income Statement for October.

Prepare the Retained Earnings Statement for October.

Prepare the Balance Sheet as of October 31, 2019.

Prepare the Statement of Cash Flows for October.

Prepare the closing journal entries.

Post the closing entries to the ledger accounts (T-accounts).

Prepare a post-closing trial balance.

All work papers and documents should be prepared in good form.

This assignment is to allow you make up for excessive absences and other chapter assignment deficiencies in the class.

You can work together on the assignment.

You can ask me questions about the assignment, but only those questions that you would ask Joe. Remember, you are the accountant.

Answer 1

As per policy, only four parts of a question are allowed to answer at a time and also answering limit is there for 65000 characters, here we are answering more than four for you, for others please re-post the question with requirements:

	Chart of accounts:
	Cash
	Common Stock
	Aircraft
	Note payable
	Pre-paid Insurance
	Rent expense
	Inventory - Fuel
	Accounts payable
	Accounts Receivable
	Service Revenue
	Repair and Maintenance
	Salaries & Wages
Journal Entries:
Date	Accounts Title	Debit $	Credit $
1	Cash	50000
	Common Stock		50000
	(capital introduced)
2	Aircraft	90000
	Cash		20000
	Note payable		70000
	(aircraft purchased & note issued)
3	Pre-paid Insurance	6000
	Cash		6000
	(1 yr. insurance purchased)
4	Rent expense	600
	Cash		600
	(oct month's rent paid for airport)
5	Inventory - Fuel	4500
	Accounts payable		4500
	(being fuel purchased on credit)
6	Accounts Receivable	1200
	Service Revenue		1200
	(being billed for services to students)
7	Cash	3500
	Service Revenue		3500
	(payment received for services)
8	Repair and Maintenance	1100
	Cash		1100
	(repair charges paid)

T-Accounts (with adjustment entries):
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Cash
1	50000	2	20000
7	3500	3	6000
		4	600
		8	1100
		CB	25800
Common Stock
		1	50000
Aircraft
2	90000
Note payable
		2	70000
Pre-paid Insurance
3	6000
Rent expense
4	600
Inventory - Fuel
5	4500	31-Oct	2250
		CB	2250
Accounts payable
		5	4500
Accounts Receivable
6	1200
Service Revenue
CB	4700	6	1200
		7	3500
Repair and Maintenance
8	1100
COGS
31-Oct	2250
Interest expense
31-Oct	700
Interest payable
		31-Oct	700
Depreciation exp.
31-Oct	750
Acc. Dep. - Aircraft
		31-Oct	750

Trial Balance (without adjustment):
Accounts Title	Debit $	Credit $
Cash	25800
Common Stock		50000
Air Craft	90000
Note payable		70000
Pre-paid Insurance	6000
Rent expense	600
Inventory - Fuel	4500
Accounts payable		4500
Accounts Receivable	1200
Service Revenue		4700
Repair and Maintenance	1100
Total	129200	129200
Adjustment Journal Entries:
Date	Accounts Title	Debit $	Credit $
31-Oct	COGS	2250
	Inventory - Fuel		2250
	(Being fuel expenses booked)
31-Oct	Interest expense	700
	Interest payable		700
	(interest exp. Made due)
	(70000*12%/12)
31-Oct	Depreciation exp.	750
	Acc. Dep. - Aircraft		750
	(being depreciation exp. Booked)
Adjusted Trial Balance :
Accounts Title	Debit $	Credit $
Cash	25800
Common Stock		50000
Air Craft	90000
Note payable		70000
Pre-paid Insurance	6000
Rent expense	600
Inventory - Fuel	2250
Accounts payable		4500
Accounts Receivable	1200
Service Revenue		4700
Repair and Maintenance	1100
COGS	2250
Interest exp.	700
Interest payable		700
Depreciation exp.	750
Acc. Dep. - Aircraft		750
Total	130650	130650