Question

In: Accounting

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

On April 1, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.

April 1 Nozomi invested $41,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.

April 2 The company rented furnished office space by paying $2,400 cash for the first month’s (April) rent.

April 3 The company purchased $1,200 of office supplies for cash.

April 10 The company paid $2,400 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.

April 14 The company paid $900 cash for two weeks' salaries earned by employees.

April 24 The company collected $15,500 cash for commissions earned.

April 28 The company paid $900 cash for two weeks' salaries earned by employees.

April 29 The company paid $250 cash for minor repairs to the company's computer.

April 30 The company paid $1,350 cash for this month's telephone bill.

April 30 The company paid $1,600 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. Prepaid insurance of $133 has expired this month.
  2. At the end of the month, $400 of office supplies are still available.
  3. This month’s depreciation on the computer equipment is $400.
  4. Employees earned $400 of unpaid and unrecorded salaries as of month-end.
  5. The company earned $2,400 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 the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30.
5b. Prepare the statement of retained earnings for the month of April 30.
5c. Prepare the balance sheet at April 30.
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.

Solutions

Expert Solution

1. Journal entries to record the transactions for April

2. Ledger Accounts are prepared in 6b.

3. Unadjusted trial balance as of April 30 is:

4. Adjusting entries for the month and adjusted trial balance is:

5a. Income statement for the month of April 30

5b. statement of retained earnings for the month of April 30

5c. Balance sheet at April 30

6a. journal entries to close the temporary accounts

6b. Ledger accounts

7. Post Closing Trial Balance is as prepared below:


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