Question

On April 1, 2017, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company's first month. April 1 Nozomi invested $31,000 cash and computer equipment worth $35,000 in the company in exchange for common stock. 2 The company rented furnished office space by paying $1,800 cash for the first month's (April) rent 3 The company purchased $1,000 of office supplies for cash. 10 The company paid $2,300 cash for the premium on a 12-month insurance policy. Coverage begins on April 11 14 The company paid $1,600 cash for two weeks' salaries earned by employees 24 The company collected $18,000 cash on commissions from airlines on tickets obtained for customers. 28 The company paid $1,600 cash for two weeks' salaries earned by employees. 29 The company paid $400 cash for minor repairs to the company's computer. 30 The company paid $1,450 cash for this month's telephone bill. 30 The company paid $1,600 cash in dividends. The company's chart of accounts follows: 101 Cash 106 Accounts Receivable 124 Office Supplies 128 Prepaid Insurance 167 Computer Equipment 168 Accumulated Depreciation-Computer Equip. 209 Salaries Payable 307 Common Stock 318 Retained Earnings 319 Dividends 405 Commissions Earned 612 Depreciation Expense-Computer Equip. 622 Salaries Expense 637 Insurance Expense 640 Rent Expense 650 Office Supplies Expense 684 Repairs Expense 688 Telephone Expense 901 Income Summary

Use the following information:

Two-thirds (or $128) of one month’s insurance coverage has expired.

1. At the end of the month, $500 of office supplies are still available.
2. This month’s depreciation on the computer equipment is $400.
3. Employees earned $590 of unpaid and unrecorded salaries as of month-end.
4. 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 and post the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30, 2017.
5b. Prepare the statement of retained earnings for the month of April 30, 2017.
5c. Prepare the balance sheet at April 30, 2017.
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

Adventure Travel Journal Enteries Date Particulars 1.4.2017Cash a/d Debit in $ Credit in $ Dr. Dr. 31000 Computer a/c To J.Nozomi, Capital 66000 (Common Stock issued for Cash) 2.4.2017Rent Expense a/c Dr. 1800 To Cash 1800 (Rent paid in cash) .4.2017 Office Supplies a/c Dr. 1000 To Cash 1000 (Office Supplies purchased n cash) 10.4.2017Prepaid Insurance a/c 2300 Dr To Cash 2300 (one year insurance paid in cash) 14.4.2017 Salaries Expense a/c Dr. 1600 To Cash 1600 (Salary paid in cash) 24.4.2017Cash a/c Dr. To Commission Earned (Commission earned on Flight tickets) 28.4.2017Salaries Expense a/c 1600 To Cash 1600 (Salary paid in cash) 29.4.2017 Repaires Expense a/c Dr 400 To Cash 400 (Computer repairs in cash) 30.4.2017 Telephone Expense a/c Dr 1450 To Cash 1450 (Telephone Expense paid in cash) 30.4.2017Dividends a/c Dr 1600 To Cash (Dividends paid in cash) 1600

Adjustment Enteries Date Particulars Debit in $ Credit in $ 30.4.2017Insurance Expense a/c 128 Dr To Prepaid Insurance (Insurance expense charged) 128 30.4.2017 Supplies Expense a/c To Supplies 500 (Supplies Expensed) 1000 500 500 30.4.2017Depreciation Expense Computer a/c Dr 400 To Accum. Depre Computer (Depreciation charged to Computer) 30.4.2017 Salaries Expense a/c 590 To Salaries Payable (Salary expense accrued) 590 30.4.2017 Accounts Receivable a/c Dr 1750 To Commission Earned 1750 (Commission revenue accrued) Closing Enteries Date Particulars Debit in $ Credit in $ 30.4.2017Income Summary a/c Dr 8468 To Rent Expense To Salaries Expense To Repairs Expense To Telephone Expense To Insurance Expense To Supplies Expense To Depreciation Expense Computer 1800 3790 1450 128 500 (Expense accounts closed) 30.4.2017 Commission Earned a/c Dr. 19750 To Income Summary 19750 (Revenue accounts Closed) Income Summary a/c Profits Transferred to Capital) 30.4.2017 Dr 11282 To J.Nozomi, Capital 11282 0.4.2017 J.Nozomi, Capital a/c Dr. 1600 To J.Nozomi, Withdrawals (Withdrawals charged to Capital) 1600

Trial Balance For the month ending 30.4.2017 Post Closing Debit in$ Credit in $ Unadjusted Adjustment Adjusted Debit in $ Credit in $ Debit in $ Credit in Debit in $ Credit in Particulars Cash Accounts Receivable Prepaid Insurance Office Supplies Computer Accum. Depre Computer Salaries Payable J.Nozomi, Capital Dividends Commission Earned Rent Expense Salaries Expense Repairs Expense Telephone Expense Insurance Expense Supplies Expense Depreciation Expense Computer Totals 37250 1750 2172 500 37250 37250 1750 2172 500 35000 1750 2300 1000 35000 128 500 590 590 590 1600 1600 18000 1750 19750 1800 3200 400 1450 590 3790 1450 128 128 3368 76672 84000 84000 3368 86740 86740 76672

Statement of Income For the month ending 30.4.2017 Commission Earned Less: Rent Expense Salaries Expense Repairs Expense Telephone Expense Insurance Expense Supplies Expense Depreciation Expense Computer Net Income 19750 1800 3790 400 1450 128 500 400 8468 11282 Statement of Owner's equity For the month ending 30.4.2017 J.Nozomi, Capital Net Income 66000 11282 77282 1600 75682 Less:J.Nozomi, Withdrawals

Balance sheet Amounts in Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Assets Cash Accounts Receivable Prepaid Insurance Office Supplies Current Liabilities 37250 1750 2172 500 Salaries Payable 590 41672 Non Current Assets Computer Accum. Depre Computer Total Assets Owners Equity J.Nozomi, Capital 35000 75682 -400 34600 76272 Total Liabilities & equity 76272