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:
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

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	Answer 6 a- Closing Entries
Date	Account	Debit	Credit
April 30th	Commission Earned	26,000.00
	Income Summary		26,000.00
April 30th	Income Summary	7,758.00
	Depreciation Expense—Computer Equip.		400.00
	Salaries Expense		2,180.00
	Insurance Expense		128.00
	Rent Expense		2,700.00
	Office Supplies Expense		1,100.00
	Repairs Expense		400.00
	Telephone Expense		850.00
April 30th	Income Summary	18,242.00
	J. Nozomi, Capital		18,242.00
April 30th	J. Nozomi, Capital	2,000.00
	Drawings		2,000.00

Answer 7- Post Closing Trial Balance	Debit	Credit
Cash	52,250.00
Accounts Receivable	2,000.00
Office Supplies	600.00
Prepaid Insurance	2,172.00
Computer Equipment	30,000.00
Accumulated Depreciation—Computer Equip.		400.00
Salaries Payable		380.00
J. Nozomi, Capital		86,242.00
Total	87,022.00	87,022.00

Answer 6 b- Ledger
Cash
Date	Account	Debit	Credit	Balance
April 1st	J. Nozomi, Capital	40,000.00		40,000.00
April 2nd	Rent Expense		2,700.00	37,300.00
April 3rd	Office Supplies		1,700.00	35,600.00
April 10th	Prepaid Insurance		2,300.00	33,300.00
April 14th	Salaries Expense		900.00	32,400.00
April 24th	Commission Earned	24,000.00		56,400.00
April 28th	Salaries Expense		900.00	55,500.00
April 29th	Repairs Expense		400.00	55,100.00
April 30th	Telephone Expense		850.00	54,250.00
April 30th	Drawings		2,000.00	52,250.00
Accounts Receivable
Date	Account	Debit	Credit	Balance
April 30th	Commissions Earned	2,000.00		2,000.00
Office Supplies
Date	Account	Debit	Credit	Balance
April 3rd	Cash	1,700.00		1,700.00
April 30th	Office Supplies Expense		1,100.00	600.00
Prepaid Insurance
Date	Account	Debit	Credit	Balance
April 10th	Cash	2,300.00		2,300.00
April 30th	Insurance Expense		128.00	2,172.00
Computer Equipment
Date	Account	Debit	Credit	Balance
April 1st	J. Nozomi, Capital	30,000.00	-	30,000.00
Accumulated Depreciation—Computer Equip.
Date	Account	Debit	Credit	Balance
April 30th	Depreciation Expense—Computer Equip.		400.00	400.00
Salaries Payable
Date	Account	Debit	Credit	Balance
April 30th	Salaries Expense	-	380.00	380.00
J. Nozomi, Capital
Date	Account	Debit	Credit	Balance
April 1st	Cash		40,000.00	40,000.00
April 1st	Computer Equipment		30,000.00	70,000.00
April 30th	Income Summary	-	18,242.00	88,242.00
April 30th	Dividends	2,000.00	-	86,242.00
Drawings
Date	Account	Debit	Credit	Balance
April 30th	Cash	2,000.00	-	2,000.00
Salaries Expense
Date	Account	Debit	Credit	Balance
April 14th	Cash	900.00	-	900.00
April 28th	Cash	900.00		1,800.00
April 30th	Salaries Payable	380.00		2,180.00
Insurance Expense
Date	Account	Debit	Credit	Balance
April 30th	Prepaid Insurance	128.00	-	128.00
Rent Expense
Date	Account	Debit	Credit	Balance
April 2nd	Cash	2,700.00	-	2,700.00
Office Supplies Expense
Date	Account	Debit	Credit	Balance
April 30th	Office Supplies	1,100.00	-	1,100.00
Repairs Expense
Date	Account	Debit	Credit	Balance
April 29th	Cash	400.00	-	400.00
Telephone Expense
Date	Account	Debit	Credit	Balance
April 30th	Cash	850.00	-	850.00
Commission Earned
Date	Account	Debit	Credit	Balance
April 24th	Cash		24,000.00	24,000.00
April 30th	Accounts Receivable		2,000.00	26,000.00
Depreciation Expense—Computer Equip.
Date	Account	Debit	Credit	Balance
April 30th	Accumulated Depreciation—Computer Equip.	400.00	-	400.00
Income Summary
Date	Account	Debit	Credit	Balance
April 30th	Commission Earned		26,000.00	26,000.00
April 30th	Depreciation Expense—Computer Equip.	400.00		25,600.00
April 30th	Salaries Expense	2,180.00		23,420.00
April 30th	Insurance Expense	128.00		23,292.00
April 30th	Rent Expense	2,700.00		20,592.00
April 30th	Office Supplies Expense	1,100.00		19,492.00
April 30th	Repairs Expense	400.00		19,092.00
April 30th	Telephone Expense	850.00		18,242.00