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 $30,000 cash and computer equipment worth $20,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $1,800 cash for the first month's (April) rent.
		3		The company purchased $1,000 of office supplies for cash.
		10		The company paid $2,400 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 $8,000 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 $350 cash for minor repairs to the company's computer.
		30		The company paid $750 cash for this month's telephone bill.
		30		The company paid $1,500 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 $133) 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 $500.

Employees earned $420 of unpaid and unrecorded salaries as of month-end.

The company earned $1,750 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.

Using adjusted account balances from Requirement 6b, prepare an adjusted trial balance as of April 30.

ADVENTURE TRAVEL Adjusted Trial Balance April 30, 2017 Account Title Debit Credit 101: Cash $27,000 106: Accounts receivable 1,750 124: Office supplies 600 128: Prepaid insurance 2,267 167: Computer equipment 20,000 168: Accumulated depreciation—Computer equipment 500 209: Salaries payable 420 307: Common stock 50,000 318: Retained earnings 319: Dividends 405: Commissions earned 612: Depreciation expense—Computer equipment 622: Salaries expense 637: Insurance expense 640: Rent expense 650: Office supplies expense 684: Repairs expense 688: Telephone expense Total $51,617 $50,920

Answer 1

Journal entries

	Date	Particulars	L.F	Amount ($)	Amount ($)
	Apr-01	Cash		30,000
		Computer equipment		20,000
		Common Stock			50,000
		(For cash and equipment invested)
	Apr-02	Rent Expense		1,800
		cash			1,800
		(for rent paid for april)
	Apr-03	Office Supplies		1,000
		cash			1,000
		(For office supplies purchased)
	Apr-10	Prepaid Insurance		2,400
		Cash			2,400
		(For insurance premium for 12 months paid in advance)
	Apr-14	Salaries expense		1,600
		cash			1,600
		(for 2 weeks salaries paid)
	Apr-24	Cash		8,000
		Commissions earned			8,000
		(For cash received for commissions earned)
	Apr-28	Salaries expense		1,600
		cash			1,600
		(for 2 weeks salaries paid)
	Apr-29	Repairs Expense		350
		cash			350
		(for cash paid for computer repair)
	Apr-30	Telephone expense		750
		cash			750
		(For cash paid for telephone expense)
	Apr-30	Dividends		1,500
		cash			1,500
		(For cash paid for dividends)
		Adjusting Entries:
a.	Apr-30	Insurance expense		133
		Prepaid Insurance			133
		(For Insurnace for 30 days expired)
b.	Apr-30	Supplies Expense		400
		Office Supplies			400
		(for office supplies expensed)
c.	Apr-30	Depreciation exp-Office Equipment		500
		Accumulated dep-Office Equipment			500
		(For equipment depreciated)
d.	Apr-30	Salaries expense		420
		Salaries payable			420
		(For salaries earned)
e.	Apr-30	Account Receivable		1,750
		Commission Earned			1,750
		(for commission eraned but not billed)
		Closing Entries
	Date	Particulars	L.F	Debit	Credit
				$	$
	Apr-30	Commission earned		9,750
		Income summary			9,750
		(For income closing balances recorded)
	Apr-30	Income summary		7,553
		Salary Expense			3,620
		Rent Expense			1,800
		Insurance expense			133
		Supplies expense			400
		Telephone expense			750
		Repair expense			350
		Depreciation-Equipment			500
		(For expenses closing balances recorded)
	Apr-30	Income summary		2,197
		Retained Earnings			2,197
		(For income summary close to retained earnings account)
	Apr-30	Retained earnings		1,500
		Dividends			1,500
		(For dividends transferred to retained earnings account)

Ledger accounts

Cash                 101

Rent               640

Income summary               901

Particulars

Amount

Particulars

Amount

Particulars

Amount

Particulars

Amount

Particulars

Amount

Particulars

Amount

Apr-01

30,000

Apr-03

1,000

Apr-02

1,800

Income summary

1,800

Apr-30

500

Apr-30

9,750

Apr-24

8,000

Apr-02

1,800

Apr-30

3,620

Apr-10

2,400

Apr-30

133

Apr-14

1,600

Apr-30

1,800

Apr-28

1,600

Accumulated dep                 168

Apr-30

400

Apr-29

350

Particulars

Amount

Particulars

Amount

Apr-30

550

Apr-30

750

Apr-30

500

Apr-30

750

Apr-30

1,500

0

500

7,753

9,750

38,000

11,000

Apr-30

500

Apr-30

1,997

Apr-30

27,000

9,750

9,750

Commission earned                             405

Office Supplies exp          650

Particulars

Amount

Particulars

Amount

Particulars

Amount

Particulars

Amount

Income summary

9,750

Apr-24

8,000

Apr-30

400

Income Summary

400

Apr-30

1,750

Account Receivable                           106

Particulars

Amount

Particulars

Amount

Salaries payable            209

Apr-30

1,750

Particulars

Amount

Particulars

Amount

1,750

0

Apr-30

420

Apr-30

1,750

0

420

Apr-30

420

Depreciation exp                         612

Particulars

Amount

Particulars

Amount

Repairs expense             684

Apr-30

500

Income summary

500

Particulars

Amount

Particulars

Amount

Apr-29

350

Income summary

550

Office Supplies                       124

Particulars

Amount

Particulars

Amount

Apr-03

1,000

Apr-30

400

Common Stock             307

1,000

400

Particulars

Amount

Particulars

Amount

Apr-30

600

Apr-01

50,000

Salaries Exp                     622

Apr-30

50,000

Particulars

Amount

Particulars

Amount

Apr-14

1,600

Income Summary

3,620

Telephone exp            688

Apr-28

1,600

Particulars

Amount

Particulars

Amount

Apr-30

420

Apr-30

750

Income summary

750

Prepaid Insurance                    128

Particulars

Amount

Particulars

Amount

Apr-10

2,400

Apr-30

133

Retained earnings      318

2,400

133

Particulars

Amount

Particulars

Amount

Apr-30

2,267

Apr-30

1,700

Apr-30

3,781

1,700

3,781

Insurance Exp                    637

Apr-30

2,081

Particulars

Amount

Particulars

Amount

Apr-30

133

Income Summary

133

Dividends                   319

Particulars

Amount

Particulars

Amount

Apr-30

1,500

Retained earnings

1,500

Computer Equipment                167

Particulars

Amount

Particulars

Amount

Apr-01

20,000

20,000

0

Apr-30

20,000