Question

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

Apr.		1		Carter invested $37,000 cash and computer equipment worth $18,000 in the company.
Apr.		2		The company rented furnished office space by paying $2,100 cash for the first month’s (April) rent.
Apr.		3		The company purchased $2,000 of office supplies for cash.
Apr.		10		The company paid $3,600 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
Apr.		14		The company paid $1,400 cash for two weeks’ salaries earned by employees.
Apr.		24		The company collected $14,000 cash for commissions earned.
Apr.		28		The company paid $1,400 cash for two weeks’ salaries earned by employees.
Apr.		29		The company paid $500 cash for minor repairs to the company’s computer.
Apr.		30		The company paid $600 cash for this month’s telephone bill.
Apr.		30		Carter withdrew $2,200 cash from the company for personal use.

Information for month-end adjustments follows:

1. Prepaid insurance of $200 has expired this month.
2. At the end of the month, $600 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $300.
4. Employees earned $560 of unpaid and unrecorded salaries as of month-end.
5. The company earned $1,840 of commissions that are not yet billed at month-end.

Answer 1

Journal Entries
Date	Account Titles and Explanation	Debit	Credit
Apr. 1	Cash	$37,000
	Equipment	$18,000
	Common Stock ($37,000 + $18,000)		$55,000
	(To record the cash and equipment invested in business)
Apr. 2	Rent Expense	$2,100
	Cash		$2,100
	(To record the payment of rent for office space)
Apr. 3	Office Supplies	$2,000
	Cash		$2,000
	(To record the purchase of office supplies by cash)
Apr. 10	Prepaid Insurance	$3,600
	Cash		$3,600
	(To record the prepayment of insurance for 12 months)
Apr. 14	Salaries and Wages Expense	$1,400
	Cash		$1,400
	(To record the payment of salaries and wages expenses)
Apr. 24	Cash	$14,000
	Commission Revenue		$14,000
	(To record the collection of commissions earned)
Apr. 28	Salaries and Wages Expense	$1,400
	Cash		$1,400
	(To record the payment of salaries and wages expenses)
Apr. 29	Repair Expenses	$500
	Cash		$500
	(To record the payment of repair expenses)
Apr. 30	Telephone Expenses	$600
	Cash		$600
	(To record the payment of telephone expenses)
Apr. 30	Drawings	$2,200
	Cash		$2,200
	(To record the cash withdrawal for personal use)
Adjusting Entries
Date	Account Titles and Explanation	Debit	Credit
Apr. 30	Insurance Expense	$200
	Prepaid Insurance		$200
	(To record the expiration of one month insurance)
Apr. 30	Supplies Expense	$1,800
	Office Supplies ($2,000 - $200)		$1,800
	(To record the usage of supplies)
Apr. 30	Depreciation Expense	$300
	Accumulated Depreciation - Equipment		$300
	(To record the depreciation on computer equipment)
Apr. 30	Salaries and Wages Expense	$560
	Salaries and Wages Payable		$560
	(To record the accrual of salaries and wages expense)
Apr. 30	Accounts Receivable	$1,840
	Commission Revenue		$1,840
	(To record the services earned)