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 ea 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 106 Accounts Receivable 124 Office Supplies 128 Prepaid Insurance 167 Computer Equipment 168 Accumulated Depreciation Computer Equip. 209 Salaries Payable 307 Common Stock 318 Retained Earnings 319 Dividends 405 Comissions Earned 612 Depreciation Expense-Computer Equip. 622 Salaries Expense 637 Insurance Expense 640 Rent Expense 650 Office Suppl Les Expense 684 Repairs Expense 688 Telephone Expense 901 Income Summary Use the following information: a. Two-thirds (or $133) of one month's insurance coverage has expired. b. At the end of the month, $600 of office supplies are still available. c. This month's depreciation on the computer equipment is $500. d. Employees earned $420 of unpaid and unrecorded salaries as of month-end. e. 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

Answer 1

1. Prepare Journal Entries. S.No Particulars Debit Credit Cash Computer Equipment Common Stock 30,000 20,000 50,000 A Rent Expense 1,800 Cash 1,800 A 3 1,000 Office Supplies Cash 1,000 2,400 Prepaid Insurance Cash 2,400 A 1,600 Salaries Expense Cash 1,600 . 8,000 Cash Commissions Earned 8,000 1,600 Salaries Expense Cash 1,600 350 Repairs Expense - Computer $ Cash 350 Telephone Bill Cash 750 30 u Dividends Cash 1,500 1,500

2. Prepare Adjusting Journal Entries. S.No Particulars | Debit | Credit ___ a. Insurance Expense Prepaid Insurance 133 b. Office Supplies Expense Office Supplies $ Dep. Expense - Computer Equip. Accum. Dep. - Computer Equip. d. Salaries Expense Salaries Payable Accounts Receivable Commissions Earned 1,750

Adjustments Debit Credit | A 1,750 A A A A A Adjusted Debit Credit 27,000 $ 1,750 $ 600 2,267 20,000 500 420 50,000 A A A " A A A A 3 & 4. Prepare the UnAdjusted Trial Balance and Adjusted Trial Balance. Adventure Travel April 30, 2017 Trial Balance Unadjusted No. Particulars Debit Credit 101 Cash 27,000 106 Accounts Receivables $ 124 Office Supplies 1,000 128 Prepaid Insurance 2,400 167 Computer Equipment 20,000 168 Accum. Dep. - Computer Equipment 209 Salaries Payable 307 Common Stock 50,000 318 Retained Earnings 319 Dividends 1,500 405 Commissions Earned 8,000 612 Dep. Expense - Computer Equipment 622 Salaries Expense 3,200 637 Insurance Expense 640 Rent Expense 1,800 650 Office Supplies Expense 684 Repairs Expense - Computer 350 688 Telephone Expense 750 Totals $ 58,000 $ 58,000 $ A A A A A A A A A 1,500 A $ 1,750 A A 500 500 A A A 420 A A A 133 A A A A A 400 3,620 133 1,800 400 350 750 $ 60,670 $ A A A A A A A 3,203 $ 3,203 $ 60,670

5a. Prepare an Income Statement. Adventure Travel April 30, 2017 Income Statement Particulars Revenue : Commissions Earned $ Amount ($) 9,750 A A Expenses : Dep. Expense - Computer Equipment Salaries Expense Insurance Expense Rent Expense Office Supplies Expense Repairs Expense - Computer Telephone Expense Total Expenses 500 3,620 133 1,800 A A A 400 350 A 750 A 7,553 NET INCOME $ 2,197

$ 5b. Prepare a Balance Sheet. Adventure Travel April 30, 2017 Balance Sheet Particulars Cash Accounts Receivable Office Supplies Prepaid Insurance Total Current Assets htra Amount ($) 27,000 1,750 600 2,267 31,617 A 20,000 -500 A Computer Equipment Accumulated Depreciation Property, plant and Equipment Total Assets 19,500 51,117 420 Salaries Payable Total Current Liabilities 420 Total Liabilities 420 Common Stock Retained Earnings Total Stockholders' Equity 50,000 697 50,697 Total Liabilities and Stockholders' Equity $ 51,117

5c. Prepare a Statement of Retained Earnings. Adventure Travel April 30, 2017 Statement of Retained Earnings Particulars Opening Balance Add : Net Income Less : Dividends Closing Balance Amount ($) 2,197 -1,500 697