Question

In: Accounting

On April 1, 2017, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions...

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:
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.

Solutions

Expert Solution

April Journal Entries Dr. ($) Cr. ($)
1 cash 40000
computer equipment 30000
To capital 70000
2 rent expense 2700
To cash 2700
3 office supplies 1700
To cash 1700
10 prepaid insurance 2300
To cash 2300
14 salaries expenses 900
To cash 900
24 cash 24000
To commission earned 24000
28 salaries expenses 900
To cash 900
29 repair expenses 400
To cash 400
30 telephone expenses 850
To cash 850
30 withdrawals 2000
To cash 2000
April Adjusting Entries Dr. ($) Cr. ($)
30 insurance expenses 128
To prepaid insurance 128
30 office supplies expenses (1700-600) 1100
To office supplies 1100
30 depreciation expenses – computer equipment 400
To accumulated depreciation – computer equipment 400
30 salaries expenses 380
To salaries payable 380
30 accounts receivable 2000
To commission earned 2000

Ledger Accounts - please note that the adjusting entries have not been recorded in the below accounts

Cash
Date Dr. ($) Cr. ($) Balance
1 40000 0 40000
2 0 2700 37300
3 0 1700 35600
10 0 2300 33300
14 0 900 32400
24 24000 0 56400
28 0 900 55500
29 0 400 55100
30 0 850 54250
30 0 2000 52250
Computer equipment
Date Dr. ($) Cr. ($) Balance
1 30000 0 30000
Office supplies
Date Dr. ($) Cr. ($) Balance
3 1700 0 1700
Prepaid insurance
Date Dr. ($) Cr. ($) Balance
10 2300 0 2300
rent expenses
Date Dr. ($) Cr. ($) Balance
2 2700 0 2700
Salaries expenses
Date Dr. ($) Cr. ($) Balance
14 900 0 900
28 900 0 1800
Repair expenses
Date Dr. ($) Cr. ($) Balance
29 400 0 400
telephone expenses
Date Dr. ($) Cr. ($) Balance
30 850 0 850
Withdrawals
Date Dr. ($) Cr. ($) Balance
30 2000 0 2000
Commission Earned
Date Dr. ($) Cr. ($) Balance
24 0 24000 24000
Capital
Date Dr. ($) Cr. ($) Balance
1 0 70000 70000

Unadjusted Trial Balance

Unadjusted Trial Balance
accounts Dr. ($) Cr. ($)
cash 52250
accounts receivable 0
office supplies 1700
prepaid insurance 2300
computer equipment 30000
capital 70000
withdrawals 2000
commission earned 24000
rent expenses 2700
salaries expenses 1800
telephone expenses 850
repair expenses 400
totals 94000 94000

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