Question

On April 1, 2018, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.

April		1		Nozomi invested $39,000 cash and computer equipment worth $30,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,800 cash for the first month’s (April) rent.
		3		The company purchased $1,800 of office supplies for cash.
		10		The company paid $2,300 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
		14		The company paid $1,000 cash for two weeks' salaries earned by employees.
		24		The company collected $13,000 cash on commissions from airlines on tickets obtained for customers.
		28		The company paid $1,000 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 $950 cash for this month's telephone bill.
		30		The company paid $1,800 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:

1. Two-thirds (or $128) of one month’s insurance coverage has expired.
2. At the end of the month, $800 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $300.
4. Employees earned $490 of unpaid and unrecorded salaries as of month-end.
5. The company earned $2,300 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, 2018.
5b. Prepare the statement of retained earnings for the month of April 30, 2018.
5c. Prepare the balance sheet at April 30, 2018.
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

Date Description Debit Credit Apr-01 Cash S 39,000 To Common Stock $39,000 Apr-01 Computer equipment S 30,000 To Common stock 30,000 Apr-02 Office Rent $ 2,800 To Cash 2,800 Apr-03 Office Supplies To Cash 1,800 $ 1,800 $ 2,300 Apr-10 Prepaid Insurance To Cash $ 2,300 Apr-14 Salaries 1,000 To Cash 1,000 Apr-24 Cash $13,000 To Commission $13,000 Apr-28 Sies 1,000 To Cash S 1,000 Apr-29 Computer Repairs To Cash $350 350 Apr-30 Telephone Expenses $950 To Cash 950 Apr-30 Dividend a/c $1,800 To Cash a/o $ 1,800 Adjustment Entries a Insurance Expenses $ 128 To Prepaid Insurance 128 1,000 b Office Supplies Expenses (1800-800) To Office supplies $ 1,000 c Depreciation 300 To Accumulated Depreciation 300 d Salaries 490 To Salaries payable 490 e Accounts Receiveable 2,300 To Commission $ 2,300

Cash a/c Particulars Common Stock Equity Commission Debit Credit Particulars 39,000$ 2,800 Office Rent $ 13,000$ 2,300 Prepaid Insurnace $ 1,800 Office Supplies $ 1,000 Salaries Expenses $ 1,000 Salaries Expenses 350 Computer repairs $ 950 Telephone Expenses $ 1,800 Dividends $ 40,000 Closing Balance $ 52,000$ 52,000 Common Stock Debit Particulars Credit Particulars $ 39,000 Cash 30,000 Computer $ 69,000 $ 69,000$ 69,000 Closing balance Computer Particulars Debit Credit Particulars Common Stock 30,000 $ 30,000 Clsoing balance $ 30,000$ 30,000 Office Rent Particulars Cash Debit $2,800 Credit Particulars $ 2,800 Income Statement $2,800$ 2,800

Prepaid Insurance Debit Particulars Cash CreditParticulars 2,300 $ 128 Insurance Expenses $ 2,172 |Closing balance 2,300$ 2,300 Insurance Expenses Debit Particulars Prepaid Insurance |$ CreditParticulars 128 $ 128Income Statement 128 $ 128 Salaries Expenses Debit Particulars Cash Cash Salaries Payables$ CreditParticulars 1,000 1,000 490$ 2,490 Income Statement 2,490$ 2,490 Commission Particulars Debit CreditParticulars $13,000 Cash $2,300Accounts receiveable Income Statement $ 15,300 15,300 $15,300 Computer Repairs Debit Particulars Cash CreditParticulars 350 $ 350 Income Statement 350 350

Telephone Bill Expenses Particulars Debit Credit Particulars Cash 950 950 Income Statement 950 $ 950 Dividend Particulars Cash Debit $1,800 Credit Particulars $1,800 Retained earnings $1,800 $1,800 Depreciation Expenses 300 Particulars Debit Credit Particulars Acc.Depreciation $ 300 Income Statement 300 $ 300 Acc.Depreciation Debit Particulars Credit Particulars $300 Depreciation Expenses Closing balance $ 300 300 300 Supplies Debit Particulars Credit Particulars Supplies Expenses $1,000 $1,800 Cash Closing balance $ 800 $1,800 $1,800

Supplies Expense Particulars Debit CreditParticulars Supplies Expenses $1,000 $1,000 Income Statement $1,000 $1,000 Accounts Receivable Debit Credit Particulars $2,300 $2,300 $2,300 Particulars Commission $2,300 Closing Balance

Adjusted Trail balance Particulars Cash Common Stock Computer Commission Office Rent Accounts Receiveable Supplies Expenses Office Supplies Depreciation Expenses Accumulated Depreciation Salaries expenses Salaries payables Dividend Prepaid Insurance Insurance Expenses Computer Repairs Telephone Bills Debit Credit $40,000 $69,000 $30,000 $15,300 $ 2,800 2,300 1,000 $800 $300 $300 $2,490 490 1,800 2,172 S 128 $350 $ 950 $85,090 $85,090

UnAdjusted Trail balance $40,000 $30,000 Particulars Cash Common Stock Computer Commission Office Rent Supplies Expenses Office Supplies Salaries expenses Dividend Prepaid Insurance Computer Repairs Telephone Bills Debit Credit $69,000 $13,000 $ 2,800 1,000 $800 2,000 1,800 2,300 $350 $ 950 $82,000 $82,000

Calculation of Net Income $15,300 Commission Less: Office Rent Supplies Expenses Depreciation Expenses Salaries expenses Insurance Expenses Computer Repairs Telephone Bills $1,000 300 $2,490 128 350 $950 $ 8,018 7,282

Assets Amount Liabilities Amount Cash Accounts Receiveable2,300 Accumulated Depreciation300 Office Supplies Prepaid Insurance $2,172 Total Current Assets $ 45,272 Total Current Liabitilties Computer 40,000 Salaries payables 490 $800 $ 790 $ 69,000 Retained Earnings(7282-1800) 5,482 30,000 CommonStock Total $ 75,272 $ 75,272

Statement of Retained Earnings Opening Retained Earnings Add: Net Income Less: Dividends paid Closing Retained Earnings$5,482 $7,282 $ 1,800