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 $46,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $1,500 cash for the first month’s (April) rent.
		3		The company purchased $1,300 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 $1,600 cash for two weeks' salaries earned by employees.
		24		The company collected $17,500 cash on commissions from airlines on tickets obtained for customers.
		28		The company paid $1,600 cash for two weeks' salaries earned by employees.
		29		The company paid $500 cash for minor repairs to the company's computer.
		30		The company paid $1,400 cash for this month's telephone bill.
		30		The company paid $2,100 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 $128) 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 $500 of unpaid and unrecorded salaries as of month-end.

The company earned $2,300 of commissions that are not yet billed at month-end.

Required:
4. 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.

Answer 1

4. Adjusted Trial Balance :

Adventure Travel
Adjusted Trial Balance
April 30, 2017
Account Titles	Debit	Credit
	$	$
Cash	51,200
Accounts Receivable	2,300
Office Supplies	600
Prepaid Insurance	2,172
Computer Equipment	25,000
Accumulated Depreciation: Computer Equipment		300
Salaries Payable		500
Common Stock		71,000
Dividends	2,100
Commissions Earned		19,800
Depreciation Expense : Computer Equipment	300
Salaries Expense	3,700
Insurance Expense	128
Rent Expense	1,500
Office Supplies Expense	700
Repairs Expense	500
Telephone Expense	1,400
Totals	$ 91,600	$ 91,600

5a.

Adventure Travel
Income Statement
For the month ended April 30, 2017
	$	$
Commissions Earned		19,800
Less: Operating Expenses
Salaries Expense	3,700
Rent Expense	1,500
Insurance Expense	128
Office Supplies Expense	700
Repairs Expense	500
Telephone Expense	1,400
Depreciation Expense: Computer Equipment	300
Total Operating Expenses		8,228
Net Operating Income		$ 11,572

5b.

Adventure Travel
Statement of Retained Earnings
For the month ended April 30, 2017
Retained Earnings, April 1	$ 0
Net Income	11,572
Dividends	(2,100)
Retained Earnings, April 30	9,472

5c.

Adventure Travel
Balance Sheet
April 30, 2017
Assets	$	Liabities and Stockholders Equity	$
Cash	51,200	Salaries Payable	500
Accounts Receivable	2,300	Common Stock	71,000
Office Supplies	600	Retained Earnings	9,472
Prepaid Insurance	2,172
Computer Equipment, net	24,700
Total Assets	$ 80,972	Total Liabilities and Stockholders Equity	$ 80,972