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 $34,000 cash and computer equipment worth $25,000 in the company.
		2		The company rented furnished office space by paying $1,600 cash for the first month’s (April) rent.
		3		The company purchased $1,700 of office supplies for cash.
		10		The company paid $2,900 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
		14		The company paid $1,200 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 $1,200 cash for two weeks' salaries earned by employees.
		29		The company paid $350 cash for minor repairs to the company's computer.
		30		The company paid $1,500 cash for this month's telephone bill.
		30		Nozomi withdrew $1,500 cash from the company for personal use.

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
301	J. Nozomi, Capital	688	Telephone Expense
302	J. Nozomi, Withdrawals	901	Income Summary

Use the following information:

Two-thirds (or $161) of one month’s insurance coverage has expired.

At the end of the month, $500 of office supplies are still available.

This month’s depreciation on the computer equipment is $400.

Employees earned $480 of unpaid and unrecorded salaries as of month-end.

The company earned $2,050 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, 2017.
5b. Prepare the statement of owner's equity 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

Part-1 JOurnal Entries:

Date	Account	Debit	Credit
Apr 1	Cash	$ 34,000
Apr 1	Computer Equipment	$ 25,000
Apr 1	Nozomi, Capital		$ 59,000
Apr 2	Rent Expense	$    1,600
Apr 2	Cash		$    1,600
Apr 3	Office Supplies	$    1,700
Apr 3	Cash		$    1,700
Apr 10	Prepaid Insurance	$    2,900
Apr 10	Cash		$    2,900
Apr 14	Salaries Expense	$    1,200
Apr 14	Cash		$    1,200
Apr 24	Cash	$ 23,500
Apr 24	Commission Earned		$ 23,500
Apr 28	Salaries Expense	$    1,200
Apr 28	Cash		$    1,200
Apr 29	Repairs Expense	$        350
Apr 29	Cash		$        350
Apr 30	Telephone Expense	$    1,500
Apr 30	Cash		$    1,500
Apr 30	Nozomi, Withdrawal	$    1,500
Apr 30	Cash		$    1,500

CLosign and Adjusting Entries:

Adjusting Entries
Date	Account	Debit	Credit
A.	Insurance Expense	$             161
	Prepaid Insurance		$             161
B.	Supplies Expense	$         1,200		1700-500
	Supplies		$         1,200
C.	Depreciation Expense-Computer Equipment	$             400
	Accumulated Depreciation-Computer Equipment		$             400
D.	Salaries Expense	$             480
	Salaries Payable		$             480
E.	Accounts Receivable	$         2,050
	Commission Earned		$         2,050
Closing Entries:
Apr 30	Commission Earned	$       25,550
	Income Summary		$       25,550
	(Closing Revenue Account)
Apr 30	Income Summary	$         8,091
	Depreciation Expense-Computer Equipment		$             400
	Salaries Expense		$         2,880
	Insurance Expense		$             161
	Rent Expense		$         1,600
	Supplies Expense		$         1,200
	Telephone Expense		$         1,500
	Repairs Expense		$             350
	(Closing Expense Account)
Apr 30	Income Summary	$       17,459
	Nozomi, Capital		$       17,459
	(Closign Income Summary)
Apr 30	Nozomi, Capital	$         1,500
	Nozomi, Withdrawal		$         1,500
	(Closign withdrawal account)

Ledger Posting:

Cash

Computer Equipment

Supplies

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 1

$       34,000

$       34,000

Apr 1

$       25,000

$       25,000

Apr 3

$       1,700

$       1,700

Apr 2

$         1,600

$       32,400

$       25,000

Apr 30

$       1,200

$           500

Apr 3

$         1,700

$       30,700

Apr 10

$         2,900

$       27,800

Apr 14

$         1,200

$       26,600

Apr 24

$       23,500

$       50,100

Apr 28

$         1,200

$       48,900

Insurance Expense

Prepaid Insurance

Apr 30

$         3,000

$       45,900

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 29

$             350

$       45,550

Apr 30

$             161

$             161

Apr 10

$       2,900

$       2,900

Apr 30

$             161

$                -

Apr 30

$           161

$       2,739

Nozomi, Withdrawal

Rent Expense

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 30

$         1,500

$         1,500

Apr 2

$       1,600

$       1,600

Apr 30

$         1,500

$                -

Apr 30

$       1,600

$              -

Commission Earned

Date

Debit

Credit

Balance

Apr 24

$       23,500

$       23,500

Apr 30

$         2,050

$       25,550

Nozomi, Capital

Telephone Expense

Apr 30

$       25,550

$                -

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 1

$       59,000

$       59,000

Apr 30

$       1,500

$       1,500

Apr 30

$         1,500

$       57,500

Apr 30

$       1,500

$              -

Apr 30

$       17,459

$       74,959

Salaries

Depreciation Expense

Accumulated Depreciation

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 14

$         1,200

$         1,200

Apr 30

$             400

$             400

Apr 30

$           400

$           400

Apr 28

$         1,200

$         2,400

Apr 30

$             400

$                -

Apr 30

$             480

$         2,880

Apr 30

$         2,880

$                -

Accounts Receivable

Salaries Payable

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 30

$         2,050

$         2,050

Apr 30

$             480

$             480

Repair Expense

Supplies Expense

Date

Debit

Credit

Balance

Date

Debit

Credit

Balance

Apr 29

$             350

$             350

Apr 30

$       1,200

$       1,200

Apr 30

$             350

$                -

Apr 30

$       1,200

$              -

Trial Balance:

Unadjusted Trial Balance				Adjustment		Adjusted Trial Balance
	Account Title	Debit	Credit	Debit	Credit	Debit	Credit
	Cash	$       45,550				$       45,550
	Accounts Receivable	$                -		$       2,050		$         2,050
	Office Supplies	$         1,700			$       1,200	$             500
	Prepaid Insurance	$         2,900			$           161	$         2,739
	Computer Equipment	$       25,000				$       25,000
			$                -				$                                  -
	Accumulated Depreciation-Computer Equipment	$                -			$           400		$                               400
	Salaries Payable		$                -		$           480		$                               480
		$                -					$                                  -
	Nozomi, Capital		$       59,000				$                         59,000
	Nozomi, Withdrawal	$         1,500				$         1,500
	Commission Earned		$       23,500		$       2,050		$                         25,550
	Depreciation Expense-Computer Equipment	$                -		$           400		$             400	$                                  -
	Salaries Expense	$         2,400		$           480		$         2,880	$                                  -
	Insurance Expense	$                -		$           161		$             161	$                                  -
	Rent Expense	$         1,600				$         1,600	$                                  -
	Supplies Expense	$                -		$       1,200		$         1,200	$                                  -
	Telephone Expense	$         1,500				$         1,500	$                                  -
	Repairs Expense	$             350				$             350	$                                  -
	Total	$       82,500	$       82,500	$       4,291	$       4,291	$       85,430	$                         85,430

Income Statement:

Income Statement
Fees Earned		$       25,550
Depreciation Expense-Computer Equipment	$             400
Salaries Expense	$         2,880
Insurance Expense	$             161
Rent Expense	$         1,600
Supplies Expense	$         1,200
Telephone Expense	$         1,500
Repairs Expense	$             350	$         8,091
Net Income		$       17,459
Owners' Capital
Capital		$       59,000
Add: net income		$       17,459
Less: Drawing		$        -1,500
Capital, ending		$       74,959
Balance Sheet
Current Assets:
Cash	$       45,550
Accounts Receivable	$         2,050
Supplies	$             500
Prepaid Insurance	$         2,739
Total Current Assets		$       50,839
Office Equipment	$       25,000
Less Accumulated Depreciation	$           -400	$       24,600
Total Assets		$       75,439
Current Liabilities:
Salaries Payable		$             480
Total Current Liabilities		$             480
Equity:
Nozomi, Capital		$       74,959
Total Liabilities and equity		$       75,439