Gunflint adventures operate an airplane service that take fishing parties to a remote lake season lake resort in northemManitoba, Canada. Individuals must purchase their tickest at least one month in advance during the busy summer season. The company adjusts its accounts only one each month. Selected balances appearing in the company's June 30 adjusted trial balance appear as follows.                                                                         DEbit              CreditPrepaid airport rent.................................................... $9,000Unexpired insurance...................................................  4,200Airplane........................................................................288,000Accumulated depreciations airplane..........................                     $80,000Uneamed passenger revenue.....................................                          75,000Other information1. The airplane is being depreciated over a 15 year life with no residual value.2. Unearned passenger revenue represents advance ticket sales for booking 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 June totaled $40,000.I have to determine the following.-The age of airplane in months.-The monthly airport rent.-The amount paid for the 12 month insurance policy on February 1.I have to prepare the adjusting  entries made on JUne 30 involving the following accounts.-Depreciation Expense: Airplane-Airplane Rent Expense- Insurance Expense-Passenger revenue Earned

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Asked Jun 11, 2019
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Gunflint adventures operate an airplane service that take fishing parties to a remote lake season lake resort in northemManitoba, Canada. Individuals must purchase their tickest at least one month in advance during the busy summer season. The company adjusts its accounts only one each month. Selected balances appearing in the company's June 30 adjusted trial balance appear as follows.

                                                                         DEbit              Credit

Prepaid airport rent.................................................... $9,000

Unexpired insurance...................................................  4,200

Airplane........................................................................288,000

Accumulated depreciations airplane..........................                     $80,000

Uneamed passenger revenue.....................................                          75,000

Other information

1. The airplane is being depreciated over a 15 year life with no residual value.

2. Unearned passenger revenue represents advance ticket sales for booking 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 June totaled $40,000.

I have to determine the following.

-The age of airplane in months.

-The monthly airport rent.

-The amount paid for the 12 month insurance policy on February 1.

I have to prepare the adjusting  entries made on JUne 30 involving the following accounts.

-Depreciation Expense: Airplane

-Airplane Rent Expense

- Insurance Expense

-Passenger revenue Earned

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Expert Answer

Step 1

Determine the age of the airplane in months:

 

Cost of the airplane is S288,000
Useful life of the airplane is 15years or 180 months
(15Years x12Months in a year
180 Months)
Accumulated depreciation is $80,000
Age of the airplane in months = Accumulated depreciati on
Monthly depreciation
$80,000
$1,600 (1)
=50 Months
Thus, the age of the airplane is 50 months
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Cost of the airplane is S288,000 Useful life of the airplane is 15years or 180 months (15Years x12Months in a year 180 Months) Accumulated depreciation is $80,000 Age of the airplane in months = Accumulated depreciati on Monthly depreciation $80,000 $1,600 (1) =50 Months Thus, the age of the airplane is 50 months

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Step 2

Working note 1: Calculate the amount for monthly depreciation:

 

Cost of the airplane
Monthly depreciation expense = Useful life in months
$288,000
180Months
$1,600
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Cost of the airplane Monthly depreciation expense = Useful life in months $288,000 180Months $1,600

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Step 3

Determine the amount of monthly airpor...

Till June 30h 2 months' rent had been recognized
Hence, 4 months of the airport rent is remaining as at June 30.
Monthly airport rent expense is calculated for remaining 4 months
Prepaid rent
Monthly rent expense= Number of remaining months
$9,000
4m onths
S2,250
Thus, the monthly airport rent expense is $2,250
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Till June 30h 2 months' rent had been recognized Hence, 4 months of the airport rent is remaining as at June 30. Monthly airport rent expense is calculated for remaining 4 months Prepaid rent Monthly rent expense= Number of remaining months $9,000 4m onths S2,250 Thus, the monthly airport rent expense is $2,250

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