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 $41,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,600 cash for the first month’s (April) rent.
		3		The company purchased $2,000 of office supplies for cash.
		10		The company paid $3,000 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 $23,500 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 $2,000 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 $167) of one month’s insurance coverage has expired.

At the end of the month, $700 of office supplies are still available.

This month’s depreciation on the computer equipment is $500.

Employees earned $410 of unpaid and unrecorded salaries as of month-end.

The company earned $1,650 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

Answer 1 & 4 & 6.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1-Apr	Cash                                              Dr.	41,000
	Computer                                   Dr.	25,000
	To Common Stock		66,000
2-Apr	Rent Expenses                          Dr.	2,600
	To Cash		2,600
3-Apr	Office Suplies                            Dr.	2,000
	To Cash		2,000
10-Apr	Prepaid Insurance                    Dr.	3,000
	To Cash		3,000
14-Apr	Salaries Expenses                     Dr.	1,300
	To Cash		1,300
24-Apr	Cash                                              Dr.	23,500
	To Commission Earned		23,500
28-Apr	Salaries Expenses                     Dr.	1,300
	To Cash		1,300
29-Apr	Repairs Expenses                      Dr.	400
	To Cash		400
30-Apr	Telephone Expenses               Dr.	1,350
	To Cash		1,350
30-Apr	Dividends                                     Dr.	2,000
	To Cash		2,000
Adjusting Entry
a.	Insurance Expenses                 Dr.	167
	To Prepaid Insurance		167
b.	Office Supplies Expenses      Dr.	1,300
	To Office Supplies		1,300
c.	Depreciation Expenses           Dr.	500
	To Accumulated Dep. - Computer		500
d.	Salaries Expenses                     Dr.	410
	To Salary Payable		410
e.	Accounts Receivable               Dr.	1,650
	To Commission Earned		1,650
Closing Journal Entries
a.	Income Summary                     Dr.	9,327
	To Dep. Expenses - Computer		500
	To Salaries Expenses		3,010
	To Insurance Expense		167
	To Rent Expense		2,600
	To Office Supplies Expense		1,300
	To Repairs Expense		400
	To Telephone Expense		1,350
b.	Commision Earned                  Dr.	25,150
	To Income Summary		25,150
c.	Income Summary                     Dr.	15,823
	To Retained Earnings		15,823
d.	Retained Earnings                    Dr.	2,000
	To Dividends		2,000

Answer 2.
Cash					Accounts Receivable					Office Supplies
1-Apr	41,000	2,600	2-Apr		e.	1,650				3-Apr	2,000	1,300	b.
24-Apr	23,500	2,000	3-Apr
		3,000	10-Apr
		1,300	14-Apr
		1,300	28-Apr
		400	29-Apr
		1,350	30-Apr
		2,000	30-Apr
End. Bal	50,550				End. Bal	1,650				End. Bal	700
Prepaid Insurance					Computer					Accumulated Dep - Computer
10-Apr	3,000	167	a.		1-Apr	25,000						500	c.
End. Bal	2,833				End. Bal	25,000				End. Bal		500
Salaries Payable					Common Stock					Dividends
		410	d.				66,000	1-Apr		30-Apr	2,000
End. Bal		410			End. Bal		66,000			End. Bal	2,000
Commision Earned					Dep. Expenses - Computer					Salaries Expenses
		23,500	24-Apr		c.	500				14-Apr	1,300
		1,650	e.							28-Apr	1,300
										d.	410
End. Bal		25,150			End. Bal	500				End. Bal	3,010
Insurance Expense					Rent Expense					Office Supplies Expense
a.	167				2-Apr	2,600				b.	1,300
End. Bal	167				End. Bal	2,600				End. Bal	1,300
Repairs Expense					Telephone Expense
29-Apr	400				30-Apr	1,350
End. Bal	400				End. Bal	1,350

Answer 3.
Unadjusted Trial Balance
April 30, 2017
Particulars	Dr. Amt.	Cr. Amt.
Cash	50,550.00
Accounts Receivable	-
Office Supplies	2,000.00
Prepaid Insurance	3,000.00
Computer	25,000.00
Accumulated Dep - Computer		-
Salaries Payable		-
Common Stock		66,000.00
Dividends	2,000.00
Commision Earned		23,500.00
Dep. Expenses - Computer	-
Salaries Expenses	2,600.00
Insurance Expense	-
Rent Expense	2,600.00
Office Supplies Expense	-
Repairs Expense	400.00
Telephone Expense	1,350.00
Total	89,500.00	89,500.00
		-
Answer 4.
Adjusted Trial Balance
April 30, 2017
Particulars	Dr. Amt.	Cr. Amt.
Cash	50,550.00
Accounts Receivable	1,650.00
Office Supplies	700.00
Prepaid Insurance	2,833.00
Computer	25,000.00
Accumulated Dep - Computer		500.00
Salaries Payable		410.00
Common Stock		66,000.00
Dividends	2,000.00
Commision Earned		25,150.00
Dep. Expenses - Computer	500.00
Salaries Expenses	3,010.00
Insurance Expense	167.00
Rent Expense	2,600.00
Office Supplies Expense	1,300.00
Repairs Expense	400.00
Telephone Expense	1,350.00
Total	92,060.00	92,060.00
		-
Answer 5.
Income Statement
For The Month Ended April 30, 2017
Revenue
Commision Earned		25,150.00
Operating Expenses
Selling & Admn. Expenes
Dep. Expenses - Computer	500.00
Salaries Expenses	3,010.00
Insurance Expense	167.00
Rent Expense	2,600.00
Office Supplies Expense	1,300.00
Repairs Expense	400.00
Telephone Expense	1,350.00	9,327.00
Net Operating Income		15,823.00
Retained Earning Statement
As on April 30, 2017
Beginning Balance	-
Net Operating Income	15,823.00
Sub-total	15,823.00
Less: Dividends	2,000.00
Ending Balance	13,823.00
Answer e.
Balance Sheet
As on April 30, 2017
Assets
Current Assets
Cash	50,550.00
Accounts Receivable	1,650.00
Office Supplies	700.00
Prepaid Insurance	2,833.00	55,733.00
Property, Plant & Equipment
Computer	25,000.00
Accumulated Depreciation	(500.00)	24,500.00
Total Assets		80,233.00
Liabilities & Stockholders' Equity
Liabilities
Current Liabilities
Salaries Payable	-	410.00
Long Term Liabilities		-
Total Liabilities		410.00
Stockholders' Equity
Common Stock	66,000.00
Retained Earnings	13,823.00
Total Stockholders' Equity		79,823.00
Total Laibilities & Stockholders' Equity		80,233.00
Answer 7.
Post Closing Trial Balance
April 30, 2017
Particulars	Dr. Amt.	Cr. Amt.
Cash	50,550.00
Accounts Receivable	1,650.00
Office Supplies	700.00
Prepaid Insurance	2,833.00
Computer	25,000.00
Accumulated Depreciation		500.00
Salaries Payable		410.00
Common Stock		66,000.00
Retained Earnings		13,823.00
Total	80,733.00	80,733.00