Financial and Managerial Accounting: P4-3A Gunflint Adventures operates an airplane service

Financial and Managerial Accounting

P4-3A
Gunflint Adventures operates an airplane service that takes fishing parties to a remote lake resort in north Manitoba, Canada. Individuals must purchase their tickets at least one month in advance during the busy summer season. The company adjusts its accounts only once each month.
Selected balances appearing in the company’s June 30 adjusted trail balance appear as follows:
Debit Credit
Prepaid airport rent $7,200
Unexpired insurance 3,500
Airplane 240,000
Accumulated Depreciation – Airplane $36,000
Unearned passenger revenue 90,000

Other Information
1. The airplane is being depreciated over a 20-year life with no residual value.
2. Unearned passenger revenue represents advance ticket sales for bookings in July and August at $300 per ticket.
3. Six months airport rent had been prepaid on May 1.
4. The unexpired insurance is what remains of a 12-month policy purchased on February 1.
5. Passenger revenue earned in June totaled $75,000.

Instructions:
A. Determine the following
1. The age of the airplane in months
2. The monthly airport expense
3. The amount paid for the 12 month insurance policy on February 1
B. Prepare the adjusting entries made on June 30 involving the following accounts:
1. Depreciation Expense: airplane
2. Airport rent expense
3. Insurance expense
4. Passenger revenue earned
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