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FRA Quiz 1 Question

VIP Limo, Inc provides limousine services and has completed its second year of operations. The accountant has prepared financial statements with balances as of June 30, 2020 but additional information is needed. This includes adjustments for prepaid rent, insurance and maintenance expenses, depreciation of limousines, interest on notes payable, unearned revenue, and estimated taxes. The accountant requests updated financial statements be prepared incorporating this additional data.

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225 views1 page

FRA Quiz 1 Question

VIP Limo, Inc provides limousine services and has completed its second year of operations. The accountant has prepared financial statements with balances as of June 30, 2020 but additional information is needed. This includes adjustments for prepaid rent, insurance and maintenance expenses, depreciation of limousines, interest on notes payable, unearned revenue, and estimated taxes. The accountant requests updated financial statements be prepared incorporating this additional data.

Uploaded by

ashish
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Q.

VIP Limo, Inc was organized to provide limousine service between the Lucknow airport and various suburban
locations. It has just completed its second year of business. The accountant has recorded most of the
transactions and he is presenting the same to the founders with their respective Closing Balances at the end of
the year (June 30).

VIP Limo Inc, June 30, 2020

Cash $ 9,812
Account Receivable 14,227
Prepaid Rent 12,000
Prepaid insurance 4,900
Prepaid maintenance 12,000
Spare Parts 11,310
Limousines 2, 20,000
Accumulated Depreciation-Limousines $35,000
Notes Payable 45,000
Unearned passenger service revenue 30,000
Common stock 40,000
Retained earnings 48,211
Dividend 20,000
Passenger service revenue 4, 28,498
Gas and oil expense 89,300
Salaries expense 2, 06,360
Advertising expense 26,800
$ 626,709 $ 626,709

However, the accountant reminded the owners that he following additional information is also available
and still needs to be incorporated:
a) To obtain space at the airport, VIP Limo paid two years’ rent in advance when it began the business.
b) An examination of insurance policies reveals that $1,800 expired during the year.
c) To provide regular maintenance for the vehicles, VIP Limo deposited $12,000 with a local garage. An
examination of maintenance invoices reveals charges of $10,944 against the deposit.
d) An inventory of spare parts shows $2,016 on hand.
e) VIP Limo depreciates all of its limousines at the rate of 12.5 percent per year. No limousines were
purchased during the year.
f) A payment of $11,300 for one full year’s interest on notes payable in now due.
g) Unearned Passenger service Revenue on June 30 includes $17,815 for tickets that employers purchased
for use by their executives but which have not yet been redeemed.
h) Federal income taxes for the year are estimated to be $ 13,250

After incorporating the above transactions,


 Prepare an income statement for the year ended on June 30, and the balance sheet as on June 30, 2020.

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