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 $34,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,000 cash for the first month’s (April) rent.
		3		The company purchased $1,400 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 $1,300 cash for two weeks' salaries earned by employees.
		24		The company collected $18,500 cash on commissions from airlines on tickets obtained for customers.
		28		The company paid $1,300 cash for two weeks' salaries earned by employees.
		29		The company paid $550 cash for minor repairs to the company's computer.
		30		The company paid $1,150 cash for this month's telephone bill.
		30		The company paid $2,500 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 $128) 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 $500.
4. Employees earned $600 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 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 entries
Date	Account tittle	Debit $	Credit $
1-Apr	Cash	34,000
	Computer Equipment	25,000
	Common Stock		59,000
	(To record cash and computer invested in busines by owner)
2-Apr	Rent Expenses	2,000
	Cash		2,000
	(To record rent paid for the month of April )
3-Apr	Office supplies	1,400
	Cash		1,400
	(To record purchase of office supplies )
10-Apr	Prepaid Insurance	2,300
	Cash		2,300
	(To record insurance premium paid for 12-months )
14-Apr	Salaries expenses	1,300
	Cash		1,300
	(To record wages paid to the employees )
24-Apr	Cash	18,500
	Commissions Earned		18,500
	(to record collection of revenue from airelines)
28-Apr	Salaries expenses	1,300
	Cash		1,300
	(To record wages paid to the employees )
29-Apr	Repairs Expense	550
	Cash		550
	(to record repaire expenses on computer )
30-Apr	Telephone expenses	1,150
	Cash		1,150
	(to record telephone expense for the month )
30-Apr	Dividend	2,500
	Cash		2,500
	(to record payment of dividend )
	Adjustment entries;
30-Apr	Insurance Expense ( $ 2,300/12 x 2/3)	128
	Prepaid Insurance		128
	(2/3rd of monthly insurance is expired)
30-Apr	Office Supplies Expense ($ 1,400 - $ 700)	700
	Office supplies		700
30-Apr	Depreciation Expense—Computer Equip.	500
	Accumulated Depreciation—Computer Equip.		500
	(To record depreciation on computer )
30-Apr	Salaries expenses	600
	Salaries Payable		600
30-Apr	Accounts Receivable	1,750
	Commissions Earned		1,750
	(commision earned but not received )
	Adventure Travel
	Adjusted Trial Balance
	Account tittle	Debit $	Credit $
	Cash	40,000
	Accounts Receivable	1,750
	Office supplies	700
	Prepaid Insurance	2,172
	Computer Equipment	25,000
	Accumulated Depreciation—Computer Equip.		500
	Common Stock		59,000
	Salaries Payable		600
	Dividend	2,500
	Commissions Earned		20,250
	Rent Expenses	2,000
	Salaries expenses	3,200
	Repairs Expense	550
	Telephone expenses	1,150
	Insurance Expense	128
	Office Supplies Expense	700
	Depreciation Expense—Computer Equip.	500
	TOTAL	80,350	80,350

Adventure Travel
Income statement
	$	$
Commissions Earned		20,250
Less:Operating expense;
Rent Expenses	2,000
Salaries expenses	3,200
Repairs Expense	550
Telephone expenses	1,150
Insurance Expense	128
Office Supplies Expense	700
Depreciation Expense—Computer Equip.	500
Total operating expenses		8,228
Net income		12,022
Statement of retained earnings
	$
Net income	12,022
Less: Dividend paid	(2,500)
Ending balance of retained earnings		9,522
Adventure Travel
Balance sheet as at April 30 , 2017
Assets;	$	$
Computer Equipment	25,000
Less:Accumulated Depreciation—Computer Equip	(500)	24,500
Cash		40,000
Accounts Receivable		1,750
Office supplies		700
Prepaid Insurance		2,172
Total Assets		69,122
Owner's equity and liabilities;
Common stock	59,000
Retianed Earnings	9,522
Owner's equity		68,522
Salaries Payable		600
Owner's equity and liabilities		69,122