Question

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

April		1		Nozomi invested $48,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,200 cash for the first month’s (April) rent.
		3		The company purchased $1,700 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 $1,300 cash for two weeks' salaries earned by employees.
		24		The company collected $16,000 cash for commissions earned.
		28		The company paid $1,300 cash for two weeks' salaries earned by employees.
		29		The company paid $500 cash for minor repairs to the company's computer.
		30		The company paid $1,050 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:

1. Prepaid insurance of $133 has expired this month.
2. At the end of the month, $700 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $400.
4. Employees earned $350 of unpaid and unrecorded salaries as of month-end.
5. The company earned $1,800 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.
5b. Prepare the statement of retained earnings for the month of April 30.
5c. Prepare the balance sheet at April 30.
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

Please refer the following images for the solution.

The formats used may differ as per the requirements of the question. However, the end balance will remain the same.

Requirements 1, 2, 6(a) and 6(b)

Pages 1-5

Pages Income Summary Alo 17800 2210 Apad 20 By commiñcòn camed 1000 2450 139 And 30 20 atent lupino to office supply expense to sulaus enpense 70 inurance upene to repair expense to relephone eupena to defreuation expense 30 loso uw ak 9567 April 30 to retained earnings 17800 12800

Requirements 3 and 4

Page 6-7

Page 6 Requirement 3 Unadjunted Trial batance Carecer $2050 lash 2577 computer equipment 73000 common stock 2200 Rent expence 1700 Office Supplies Perepaid insurance 24.00 2600 Salaues expenne 16000 Communion earned 500 Repairs cupene . Telephone expense toso Derndends 89000 89000 Debit Credit April 30 133 Requrement y bebe. Adjushing sounal Store A Droite Insurance eupenne al . to prepaid innuranie al supplies April 30 Office eupene al to office supples al . 133 1000 (1700-700 Loop AP yo April 30 Depreciation expense ale 20 Accumulated peprenahon - computer berg equipment al April 30 350 salaues expense al to sularuês al payable 350 - April 30 Accounts Recewable Ah Les 1900 to communion lammed ali

fayet Arxiperianhat Adjusted ed torial Ballena scrit Crecla Cash 52050 25000 computer equipment common stoch 73000 2LVO Rent expene 700 2267 290 Pelle Office supplies (1700-1000) Prepaid unserenie (2400 - 133) Saluques eupeme (R600 +310) commencen lasred (16000 +1800) Repar's eupane Telephone eupenie 17800 sw los /Svo Durdenas 133 Insurance expene 1000 400 office supplies cupenu cola Depreachón eupinu eta - computer equipset sccumulated Deprecachin-compecter equeprinar us 350 salumes Payable 1800 Account Recewala 4 91550 91550 Income summary All 226 17817 Apad 20 By comminion camed 1000 2950 Aprit so to rent eupene to office supply expense to sulants expense 70 umuránce Lupenie to repauss expense to telephone expense to devecahôn ripense 133 50 lavo uw April 30 to retained earnings at 9567 17800 12800

Requirements 5(a) and 5(b)

Page 8

Requirement 5 (as page Income Statement for the Month of April 30 Reverne: & 17800 commerción lamed Ej anpemes: : Rent aupene 22000 office Supplies cupense 1000 132 2950 Ionurane eupene salaries cupene Reparts cupene relephone expene Depreciation empena Svo 1050 400 (8233) decegu lice dovestory abeceden ) 9567 womaat met Profit during the month Requirement 5060 Stuterment of returned euronings for the monk of Arrieta bulanu Retained Beginning of Eusnings A) Met profit earned during the month E Dund end puud 9567 mat 1560 Balcance 8067

Requirements 5(c) and 6(a)

Page 9

Requirement 5C Balanu Sheet All 95 on April 30 Liabilities Auch Pexeu Auce Comander equipment 73000 Common Soch 25000 Reruned earnings 8867 Lalaberuba Marc Auto cash S2QD Luament laculiho 1800 Account Kecewalik 350 quid expenses 70 Salaoues Reychle secimaluted Depruuahin computer equipment Yvo Office supplees Prepaid unwarina 2267 81817 82819 Requirement 66 Journal entries April 30 commission earned All ds 17800 to income summary al 17800 ser 8233 Aprilso 2200 LOOO 133 Income summary All to Rent expenie to office supplies eupeme 70 imaranice eupimui to sulurues eupene to repairs expense to telephone eupene to deprecahon eupenne 2950 sau 1050 YOU All 9567 April 30 In come summary to returned earnings Alc 9567

Requirement 7

Page 10

for Requrement 2 Post Closing Toual balance 75000 common stock Retained earnings salaires payable 22 Acumulated deprecahon -computer equipment 20 computer equipment 52050 Cash 1609 Acounts Recewable Dove Office Supplies 700 2267 Prepaid inwrine 81817 81817