Question

n 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 $48,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,300 cash for the first month’s (April) rent.
		3		The company purchased $1,300 of office supplies for cash.
		10		The company paid $2,700 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
		14		The company paid $1,400 cash for two weeks' salaries earned by employees.
		24		The company collected $12,500 cash for commissions earned.
		28		The company paid $1,400 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 $1,050 cash for this month's telephone bill.
		30		The company paid $2,100 cash in dividends.

Use the following information:

1. Prepaid insurance of $150 has expired this month.
2. At the end of the month, $700 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $300.
4. Employees earned $550 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.
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.

Answer 1

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Nozomi	Answer 1
Date	Account	Debit	Credit
April 1st	Cash	48,000.00
	Computer Equipment	25,000.00
	Common Stock		73,000.00
	(being share capital raised by providing cash and Equipment)
April 2nd	Rent Expense	2,300.00
	Cash		2,300.00
	(being rent paid for the month)
April 3rd	Office Supplies	1,300.00
	Cash		1,300.00
	(being office supplies purchased)
April 10th	Prepaid Insurance	2,700.00
	Cash		2,700.00
	(being insurance expense paid for the year)
April 14th	Salaries Expense	1,400.00
	Cash		1,400.00
	(being salaries paid for two weeks.)
April 24th	Cash	12,500.00
	Commission Earned		12,500.00
	(being commission income earned)
April 28th	Salaries Expense	1,400.00
	Cash		1,400.00
	(being salaries paid for two weeks.)
April 29th	Repairs Expense	500.00
	Cash		500.00
	(being repairs paid in cash.)
April 30th	Telephone Expense	1,050.00
	Cash		1,050.00
	(being Telephone Bill paid in cash.)
April 30th	Dividends	2,100.00
	Cash		2,100.00
	(being dividends paid.)

Answer 3- Unadjusted Trial Balance	Debit	Credit
Cash	47,750.00
Accounts Receivable	-
Office Supplies	1,300.00
Prepaid Insurance	2,700.00
Computer Equipment	25,000.00
Accumulated Depreciation—Computer Equip.		-
Salaries Payable		-
Common Stock		73,000.00
Retained Earnings		-
Dividends	2,100.00
Commission Earned		12,500.00
Depreciation Expense—Computer Equip.	-
Salaries Expense	2,800.00
Insurance Expense	-
Rent Expense	2,300.00
Office Supplies Expense	-
Repairs Expense	500.00
Telephone Expense	1,050.00
Total	85,500.00	85,500.00

	Answer 4- Adjustment Entries
April 30th	Insurance Expense	105.00
	Prepaid Insurance		105.00
	(being insurance expense recorded for April)
April 30th	Office Supplies Expense	600.00
	Office Supplies		600.00
	(being office supplies expense booked for April)
April 30th	Depreciation Expense—Computer Equip.	300.00
	Accumulated Depreciation—Computer Equip.		300.00
	(being depreciation expense booked for April)
April 30th	Salaries Expense	550.00
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