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 $40,000 cash and computer equipment worth $30,000 in the company.
		2		The company rented furnished office space by paying $2,700 cash for the first month’s (April) rent.
		3		The company purchased $1,700 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 $900 cash for two weeks' salaries earned by employees.
		24		The company collected $24,000 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 $400 cash for minor repairs to the company's computer.
		30		The company paid $850 cash for this month's telephone bill.
		30		Nozomi withdrew $2,000 cash from the company for personal use.

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
301	J. Nozomi, Capital	688	Telephone Expense
302	J. Nozomi, Withdrawals	901	Income Summary

Use the following information:

1. Two-thirds (or $128) of one month’s insurance coverage has expired.
2. At the end of the month, $600 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $400.
4. Employees earned $380 of unpaid and unrecorded salaries as of month-end.
5. The company earned $2,000 of commissions that are not yet billed at month-end.

Required:
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, 2017.
5b. Prepare the statement of owner's equity for the month of April 30, 2017.
5c. Prepare the balance sheet at April 30, 2017.

Answer 1

4)
Date	Account titles and explanation	Debit	Credit
a)	Insurance expense	$      128.00
	Prepaid insurance		$      128.00
b)	Office supplies expense (1700 - 600)	$   1,100.00
	Office supplies		$   1,100.00
c)	Depreciation expense-Computer equip	$      400.00
	Accumulated depreciation-Computer equip.		$      400.00
d)	Salaries expense	$      380.00
	Salaries payable		$      380.00
e)	Accounts receivable	$   2,000.00
	Commissions earned		$   2,000.00
5 a)
	ADVENTURE TRAVEL
	Income Statement
	For Month Ended April 30, 2017
	Revenues:
	Commissions earned (24000 + 2000)		$ 26,000.00
	Expenses:
	Depreciation expense-Computer equip	$      400.00
	Salaries expense  (900 + 900 + 380)	$   2,180.00
	Insurance expense	$      128.00
	Rent expense	$   2,700.00
	Office supplies expense	$   1,100.00
	Telephone expense	$      850.00
	Repairs expense	$      400.00
	Total Expenses		$   7,758.00
	Net Income		$ 18,242.00
b)	ADVENTURE TRAVEL
	Statement of OWner's Equity
	For Month Ended April 30, 2017
	J. Nozomi, Capital, April 1, 2017		0
	Add: Net income	$ 18,242.00
	Add: Owner investments	$ 70,000.00	$ 88,242.00
	Less: Wrthdrawals		$ (2,000.00)
	J.Nozomi, Capttal, April 30, 2017		$ 86,242.00
c)
	ADVENTURE TRAVEL
	Balance Sheet
	30-Apr-17
	Assets
	Cash		$ 52,250.00
	Accounts receivables		$   2,000.00
	Office supplies		$      600.00
	Prepaid insurance  (2300 -128)		$   2,172.00
	Computer equipment	$ 30,000.00
	Accumulated depreciation-Computer equipment	$    (400.00)	$ 29,600.00
	Total Assets		$ 86,622.00
	Liabilities
	Salaries payable		$      380.00
	Equity
	J. Nozomi, Capital		$ 86,242.00
	Total liabilities and equity		$ 86,622.00