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 $39,000 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 $2,400 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 $22,000 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 $400 cash for minor repairs to the company's computer. 30 The company paid $1,350 cash for this month's telephone bill. 30 The company paid $1,700 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:

Two-thirds (or $133) of one month’s insurance coverage has expired. At the end of the month, $600 of office supplies are still available. This month’s depreciation on the computer equipment is $300. Employees earned $440 of unpaid and unrecorded salaries as of month-end. The company earned $1,900 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

April	Journal Entries	Dr. ($)	Cr. ($)
1	cash	39000
	computer equipment	35000
	To common stock		74000
2	rent expenses	1800
	To cash		1800
3	office supplies	1000
	To cash		1000
10	prepaid insurance	2400
	To cash		2400
14	salaries expenses	1300
	To cash		1300
24	cash	22000
	To commission earned		22000
28	salaries expenses	1300
	To cash		1300
29	repairs expenses	400
	To cash		400
30	telephone expenses	1350
	To cash		1350
30	dividends	1700
	To cash		1700
April	Adjusting Journal Entries	Dr. ($)	Cr. ($)
30	insurance expenses	133
	To prepaid insurance		133
30	depreciation expenses – equipment	300
	To accumulated depreciation		300
30	office supplies expenses (1000-600)	400
	To office supplies		400
30	salaries expenses	440
	To salaries payable		440
30	accounts receivable	1900
	To commission earned		1900

cash
date	Dr. ($)	Cr. ($)	Balance
1	39000	0	39000
2	0	1800	37200
3	0	1000	36200
10	0	2400	33800
14	0	1300	32500
24	22000	0	54500
28	0	1300	53200
29	0	400	52800
30	0	1350	51450
30	0	1700	49750
accounts receivable
date	Dr. ($)	Cr. ($)	Balance
30	1900	0	1900
office supplies
date	Dr. ($)	Cr. ($)	Balance
3	1000	0	1000
30	0	400	600
prepaid insurance
date	Dr. ($)	Cr. ($)	Balance
10	2400	0	2400
30	0	133	2267
computer equipment
date	Dr. ($)	Cr. ($)	Balance
1	35000	0	35000
common stock
date	Dr. ($)	Cr. ($)	Balance
1	0	74000	74000
dividends
date	Dr. ($)	Cr. ($)	Balance
30	1700	0	1700
salaries payable
date	Dr. ($)	Cr. ($)	Balance
30	0	440	440
commission earned
date	Dr. ($)	Cr. ($)	Balance
24	0	22000	22000
30	0	1900	23900

rent expenses
date	Dr. ($)	Cr. ($)	Balance
2	1800	0	1800
salaries expenses
date	Dr. ($)	Cr. ($)	Balance
14	1300	0	1300
28	1300	0	2600
30	440	0	3040
telephone expenses
date	Dr. ($)	Cr. ($)	Balance
30	1350	0	1350
repairs expenses
date	Dr. ($)	Cr. ($)	Balance
29	400	0	400
Office supplies expenses
date	Dr. ($)	Cr. ($)	Balance
30	400	0	400
depreciation expenses – computer equipment
date	Dr. ($)	Cr. ($)	Balance
30	300	0	300
insurance expenses
date	Dr. ($)	Cr. ($)	Balance
30	133	0	133
accumulated depreciation – computer equipment
date	Dr. ($)	Cr. ($)	Balance
30	0	300	300

Trial Balance	unadjusted	adjustments	adjusted
accounts	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)
cash	49750				49750
accounts receivable			1900		1900
office supplies	1000			400	600
prepaid insurance	2400			133	2267
computer equipment	35000				35000
accumulated depreciation				300		300
common stock		74000				74000
dividends	1700				1700
salaries payable				440		440
commission earned		22000		1900		23900
rent expenses	1800				1800
salaries expenses	2600		440		3040
telephone expenses	1350				1350
repairs expenses	400				400
Office supplies expenses			400		400
depreciation expenses – equipment			300		300
insurance expenses			133		133
totals	96000	96000	3173	3173	98640	98640

Income Statement	$	$
commission earned	23900
total revenue		23900
less expenses
rent expenses	1800
salaries expenses	3040
telephone expenses	1350
repairs expenses	400
Office supplies expenses	400
depreciation expenses – equipment	300
insurance expenses	133
total expenses		7423
net income		16477