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 $31,000 cash and computer equipment worth $30,000 in the company.
		2		The company rented furnished office space by paying $1,900 cash for the first month’s (April) rent.
		3		The company purchased $1,400 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 $1,400 cash for two weeks' salaries earned by employees.
		24		The company collected $23,000 cash on commissions from airlines on tickets obtained for customers.
		28		The company paid $1,400 cash for two weeks' salaries earned by employees.
		29		The company paid $400 cash for minor repairs to the company's computer.
		30		The company paid $1,350 cash for this month's telephone bill.
		30		Nozomi withdrew $2,100 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 $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 $320 of unpaid and unrecorded salaries as of month-end.

The company earned $2,200 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

1 & 2) Adventure Travel

Journal Entries (Amounts in $)

Date	Account Titles and Explanations	Debit	Credit
April 1	Cash	31,000
	Computer Equipment	30,000
	J. Nozomi, Capital		61,000
April 2	Rent Expense	1,900
	Cash		1,900
April 3	Office Supplies	1,400
	Cash		1,400
April 10	Prepaid Insurance	2,400
	Cash		2,400
April 14	Salaries Expense	1,400
	Cash		1,400
April 24	Cash	23,000
	Commissions Earned		23,000
April 28	Salaries Expense	1,400
	Cash		1,400
April 29	Repairs Expense	400
	Cash		400
April 30	Telephone Expense	1,350
	Cash		1,350
April 30	J. Nozomi, Withdrawals	2,100
	Cash		2,100

Posting of the Above Journal Entries Amounts in $)

Cash

Date	Particulars	Amount	Date	Particulars	Amount
April 1	J. Nozomi, Capital	31,000	April 2	Rent Expense	1,900
April 24	Commissions Earned	23,000	April 3	Office Supplies	1,400
			April 10	Prepaid Insurance	2,400
			April 14	Salaries Expense	1,400
			April 28	Salaries Expense	1,400
			April 29	Repairs Expense	400
			April 30	Telephone Expense	1,350
			April 30	J. Nozomi, Withdrawals	2,100
		54,000			12,350
			April 30	Ending Balance	41,650

Computer Equipment

Date	Particulars	Amount	Date	Particulars	Amount
April 1	J. Nozomi, Capital	30,000

J. Nozomi, Capital

Date	Particulars	Amount	Date	Particulars	Amount
April 30	Ending Balance	61,000	April 1	Cash	31,000
			April 1	Computer Equipment	30,000
		61,000			61,000

   J. Nozomi, Drawings

Date	Particulars	Amount	Date	Particulars	Amount
April 30	Cash	2,100

  Rent Expense

Date	Particulars	Amount	Date	Particulars	Amount
April 2	Cash	1,900

Office Supplies

Date	Particulars	Amount	Date	Particulars	Amount
April 3	Cash	1,400

Prepaid Insurance

Date	Particulars	Amount	Date	Particulars	Amount
April 10	Cash	2,400

Salaries Expense

Date	Particulars	Amount	Date	Particulars	Amount
April 14	Cash	1,400	April 30	Ending balance	2,800
April 28	Cash	1,400
		2,800			2,800

  Commissions Earned

Date	Particulars	Amount	Date	Particulars	Amount
			April 24	Cash	23,000

Repairs Expense

Date	Particulars	Amount	Date	Particulars	Amount
April 29	Cash	400

Telephone Expense

Date	Particulars	Amount	Date	Particulars	Amount
April 30	Cash	1,350

3) Unadjusted Trial Balance as on April 30 (Amt in $)

Account Titles	Debit	Credit
Cash	41,650
Computer Equipment	30,000
J. Nozomi, Capital		61,000
J. Nozomi, Drawings	2,100
Rent Expense	1,900
Office Supplies	1,400
Prepaid Insurance	2,400
Salaries Expense	2,800
Commissions earned		23,000
Repairs Expense	400
Telephone expense	1,350
Totals	84,000	84,000

4) Adjusting Journal Entries (Amounts in $)

Date	Account Titles	Debit	Credit
April 30	Insurance Expense	133
	Prepaid Insurance		133
April 30	Office Supplies Expense ($1,400-$600)	800
	Office Supplies		800
April 30	Depreciation Expense—Computer Equip.	500
	Accumulated Depreciation—Computer Equip.		500
April 30	Salaries Expense	320
	Salaries Payable		320
April 30	Accounts Receivable	2,200
	Commissions Earned		2,200

Adjusted Trial Balance (Amounts in $)

Account Titles	Debit	Credit
Cash	41,650
Computer Equipment	30,000
Depreciation Expense—Computer Equip.	500
Accumulated Depreciation—Computer Equip.		500
J. Nozomi, Capital		61,000
J. Nozomi, Drawings	2,100
Rent Expense	1,900
Office Supplies	600
Office Supplies Expense	800
Prepaid Insurance ($2,400-$133)	2,267
Insurance Expense	133
Salaries Expense ($2,800+$320)	3,120
Salaries Payable		320
Commissions earned ($23,000+$2,200)		25,200
Accounts Receivable	2,200
Repairs Expense	400
Telephone expense	1,350
Totals	87,020	87,020