Question

On April 1, 2018, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.

April		1		Nozomi invested $50,000 cash and computer equipment worth $20,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,800 cash for the first month’s (April) rent.
		3		The company purchased $1,800 of office supplies for cash.
		10		The company paid $2,600 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
		14		The company paid $900 cash for two weeks' salaries earned by employees.
		24		The company collected $12,500 cash on commissions from airlines on tickets obtained for customers.
		28		The company paid $900 cash for two weeks' salaries earned by employees.
		29		The company paid $500 cash for minor repairs to the company's computer.
		30		The company paid $1,000 cash for this month's telephone bill.
		30		The company paid $1,700 cash in dividends.

The company's chart of accounts follows:

101	Cash	405	Commissions Earned
106	Accounts Receivable	612	Depreciation Expense—Computer Equip.
124	Office Supplies	622	Salaries Expense
128	Prepaid Insurance	637	Insurance Expense
167	Computer Equipment	640	Rent Expense
168	Accumulated Depreciation—Computer Equip.	650	Office Supplies Expense
209	Salaries Payable	684	Repairs Expense
307	Common Stock	688	Telephone Expense
318	Retained Earnings	901	Income Summary
319	Dividends

Use the following information:

1. Two-thirds (or $144) of one month’s insurance coverage has expired.
2. At the end of the month, $700 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $400.
4. Employees earned $560 of unpaid and unrecorded salaries as of month-end.
5. The company earned $1,750 of commissions that are not yet billed at month-end.

Required:
1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts.
3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30.
4. Journalize the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30, 2018.
5b. Prepare the statement of retained earnings for the month of April 30, 2018.
5c. Prepare the balance sheet at April 30, 2018.
6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b.
6b. Post the journal entries to the ledger.
7. Prepare a post-closing trial balance.

Answer 1

Debit Credit Date Account Title & Explanation 2018 1-Apr Cash Computer Equipment Common Stock 50.000 20,000 70,000 2,800 2-Apr Rent expense Cash 2,800 3-Apr Office Supplies Cash 1,800 1,800 2,600 10-Apr Prepaid Insurance Cash 2,600 80 900 14-Apr Salaries expense Cash 81 900 82 24-Apr Cash Commission earned 12,500 12,500 84 85 86 87 900 28-Apr Salaries expense Cash 900 88

500 89 90 29-Apr Repairs expense Cash 500 1,000 30-Apr Telephone expense Cash 1,000 1,700 30-Apr Dividends Cash 1,700 98 Adjusting Entries 144 101 144 1,100 1,100 100 30-Apr Insurance expense Prepaid Insurance 102 103 30-Apr Office Supplies expense 104 Office supplies 105 106 30-Apr Depreciation Expense-Computer Equipment 107 Accumulated depreciation-Computer Equipment 108 109 30-Apr Salaries expense Salaries Payable 400 400 560 110 560

112 113 114 30-Apr Accounts Receivable Commission Earned 1,750 1,750

General Ledger Accounts 181 182 183 184 185 Cash Debit Credit Accounts Receivable Date 30-Apr Debit Credit Balance 1,750 50,000 1,750 186 187 188 Date 1-Apr 2-Apr 3-Apr 10-Apr 14-Apr 24-Apr 28-Apr 29-Apr 30-Apr 30-Apr 2,800 1,800 2,600 900 Balance 50,000 47,200 45,400 42,800 41,900 54,400 53,500 53,000 52,000 50,300 189 190 191 192 193 194 12,500 900 500 1,000 1,700 195 Prepaid Insurance Office Supplies Debit Credit Debit Credit 196 197 198 199 Date 3-Apr 30-Apr 1,800 Balance 1,800 700 Date 10-Apr 30-Apr 2,600 Balance 2,600 2,456 1,100 144 200 201 202 203 204 205 Computer Equipment Debit Credit Date 1-Apr Balance Balance 20,000 Accumulated Depreciation - Computer Equipment Date Debit 30-Apr Credit 400 20,000 400

Salaries Payable Debit Credit Balance Common Stock Date 1-Apr Date 30-Apr Debit Credit 70,000 Balance 70,000 560 560 208 209 210 211 212 213 214 Dividends Retained Earnings Debit Date Debit Credit 215 216 Date 30-Apr 30-Apr Credit 5,946 Balance 5,946 4,246 Balance 1,700 1,700 30-Apr 30-Apr 217 1,700 1,700 218 219 220 Commissions earned Debit Date Date Depreciation expense - Computer Equipment Debit 400 Credit Credit 12,500 1,750 Balance 400 24-Apr 30-Apr 30-Apr Balance 12,500 14,250 0 30-Apr 30-Apr 400 224 14,250 226 Insurance expense Salaries expense Debit Date Credit Date Debit Credit Balance 144 144 229 900 900 560 Balance 900 1,800 2,360 14-Apr 28-Apr 30-Apr 30-Apr 30-Apr 30-Apr 144 2,360 0

232 233 Rent expense Debit Credit Credit Date 2-Apr 30-Apr 234 Balance 2,800 Office Supplies expense Date Debit 30-Apr 30-Apr Balance 1,100 2,800 1,100 2,800 1,100 235 236 237 238 239 Telephone expense Repairs expense Debit Credit Debit Credit Date 29-Apr 30-Apr Balance 500 240 Date 30-Apr 30-Apr Balance 1,000 500 1,000 500 1,000 241 242 243 Income Summary Debit Credit 14,250 244 245 246 247 248 249 Date 30-Apr 30-Apr 30-Apr Balance 14,250 5,946 8,304 5,946

Credit Credit Debit 50,300 1,750 1,800 2,600 20,000 Adventure Travel Unadjusted Trial Balance For the month ended April 30 Particulars Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation - Computer Equipment Salaries Payable Common Stock Retained Earnings Dividends Commissions earned Depreciation Expense - Computer Equipment Salaries Expense Insurance Expense Rent Expense Office Supplies Expense Repairs Expense Telephone Expense Total Adventure Travel Adjusted Trial Balance For the month ended April 30 Particulars Debit Cash 50,300 Accounts Receivable Office Supplies 700 Prepaid Insurance 2,456 Computer Equipment 20,000 Accumulated Depreciation - Computer Equipment Salaries Payable Common Stock Retained Earnings Dividends 1,700 Commissions earned Depreciation Expense - Computer Equipment 400 Salaries Expense 2,360 Insurance Expense Rent Expense 2,800 Office Supplies Expense 1,100 Repairs Expense 500 Telephone Expense 1,000 Total 85210 400 560 70,000 70,000 1,700 12,500 14,250 1,800 144 2,800 500 1,000 82500 82500 85210

115 118 14,250 119 120 121 122 123 Adventure Travel Income Statement For the month ended April 30 Revenues Commissions earned Less Expenses Depreciation Expense - Computer Equipment Salaries Expense Insurance Expense Rent Expense Office Supplies Expense Repairs Expense Telephone Expense Total Expenses Net Income 400 2,360 144 124 2,800 1,100 500 1,000 126 8,304 5,946 131 133 134 Adventure Travel Statement of Retained Earnings For the month ended April 30 Retained Earnings ,April 1 Add Net Income Subtotal Less Dividends Retained Earnings , April 30 135 137 138 5,946 5,946 (1,700) 4,246

140 142 143 144 145 Adventure Travel Balance Sheet April 30 Assets Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation - Computer Equipment Total Assets 146 147 50,300 1,750 700 2,456 20,000 400 19600 150 74806 152 Liabilities & Equity 560 Salaries Payable Total Liabilities 560 Equity 155 156 157 158 70,000 4,246 Common Stock Retained Earnings Total Equity Total Liabilities & Equity 159 74,246 74,806 160

161 162 Closing Entries Date Particulars Debit Credit 164 14,250 14,250 8,304 165 30-Apr Comission Earned 166 Income Summary 167 168 30-Apr Income Summary 169 Depreciation expense 170 Salaries expense Insurance expense 172 Rent expense Office Supplies expense Repairs expense 175 Telephone expense 400 2,360 144 2,800 1.100 500 1,000 176 5,946 5,946 177 30-Apr Income Summary 178 Retained Earnings 179 180 30-Apr Retained Earnings Dividends 182 1,700 181 1,700

Credit 256 258 Adventure Travel Post Closing Trial Balance For the month ended April 30 Particulars Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation - Computer Equipment Salaries Payable Common Stock Retained Earnings Total Debit 50,300 1,750 700 2,456 20,000 260 400 560 264 70,000 4,246 75,206 75,206 265 266