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 $35,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,000 cash for the first month’s (April) rent.
		3		The company purchased $1,500 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 $1,100 cash for two weeks' salaries earned by employees.
		24		The company collected $16,000 cash for commissions earned.
		28		The company paid $1,100 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 $1,550 cash for this month's telephone bill.
		30		The company paid $2,000 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 $128 has expired this month.
2. At the end of the month, $800 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $500.
4. Employees earned $440 of unpaid and unrecorded salaries as of month-end.
5. 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.
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.

6 April 24 16,000 Cash Commissions earned 16,000 7 April 28 1,100 Commissions earned Cash 1,100 8 April 29 400 Repairs expense Cash 400

Answer 1

1 and 2 Date General Journal 01-Apr Cash Computer Equipment Jiro Nozomi, Capital (Investment in company) Debit ($) Credit ($) 35,000 25,000 60,000 2000 02-Apr Rent Expense Cash (Rent for Apr) 2000 1500 03-Apr Office Supplies Cash (Purchase of office supplies) 1500 2300 10-Apr Prepaid Insurance Cash (Prepaid Insurance) 2300 1100 14-Apr Salaries Expense Cash (Salaries for two week 1100 16,000 24-Apr Cash Commissions Earned (Commission income) 16,000 1100 28-Apr Salaries Expense Cash (Salaries for two week 1100

400 29-Apr Repairs Expense Cash (For computer repair) 400 1550 30-Apr Telephone Expense Cash (Telephone Exp) 1550 2000 30-Apr Dividend Cash (Dividend paid) 2000 3 Adventure Travel Unadjusted Trial balance April 30, Account Titles Debit ($) Credit ($) Cash 39050 Office Supplies 1500 Prepaid Insurance 2300 Computer Equipment 25000 Jiro Nozomi, Capital 60000 Commissions Earned 16000 Salaries Expense 2200 Rent Expesne 2000 Repairs Expense 400 Telephone Expense 1550 Dividend 2000 Total 76000 76000

4 Adjusting Entries for the Month : Date General Journal 30-Apr Insurance Expense Prepaid Insurance (Prepaid insurance transfer for apr) Debit ($) Credit ($) 128 128 700 30-Apr Office Supplies Expenses Office Supplies (Office Supplies closing balance) 700 500 30-Apr Depreciation Expense—Computer Equipment Accumulated Depreciation - Computer Equipment (Depreciation) 500 440 30-Apr Salaries Expense Salaries Payable (Accrued Salary) 440 2200 30-Apr Account Receivable Commissions Earned (Commission receivable) 2200

Adventure Travel Adjusted Trial balance April 30 Account Titles Cash Account Receivable Office Supplies Prepaid Insurance Computer Equipment Jiro Nozomi, Capital Commissions Earned Salaries Expense Rent Expesne Insurance Expense Office Supplies Expense Dividend Salaries Payable Repairs Expense Telephone Expense Depreciation Expense-Computer Equipment Accumulated Depreciation - Computer Equipment Total Debit ($) Credit ($) 39050 2200 800 2172) 25000 60000 18200 2640 2000 128 700 2000 4401 400 1550 500 5001 79140 79140

5a 18200 2640 Adventure Travel Income Statement For the month ended April 30, Revenue : Commissions Earned Expense Salaries Expense Rent Expesne Insurance Expense Office Supplies Expense Repairs Expense Telephone Expense Depreciation Expense-Computer Equipment Total Expense 2000 128 700 400 1550 500 7918 Net Income 10282 5 b Adventure Travel Statement of Retained Earning For the month ended April 30, Retained Earning April 1 Add : Net Income $ 0 10282 10282 (2000) 8282 Less : Dividend Retained Earning April 30 $

5c Adventure Travel Balancesheet For the month ended April 30, Assets Debit ($) Credit ($) Current Asset Cash 39050 Account Receivable 2200 Office Supplies 800 Prepaid Insurance 2172 Total Current asset 44222 Computer Equipment 25000 Less : Accumulated Depreciation - Equipment (500) 24500 Total Assets 68722 Liabilities and Stockholders' Equity Current Liabilities Salaries Payable 440 Total Current Liabilities 440 Stockholders' Equity Jiro Nozomi, Capital 60000 Retained Earning 8282 Total stockholders' equity 68282 Total liabilities and stockholders' equity 68722

ба Closing entries Date General Journal Apr-30 Commissions Earned Income Summary Debit ($) Credit ($) 18200 18200 7918 Apr-30 Income Summary Salaries Expense Rent Expesne Insurance Expense Office Supplies Expense Repairs Expense Telephone Expense Depreciation Expense-Computer Equipment 2640 2000 128 7001 400 1550 500 10282 Apr-30 Income summary Retained Earning 10282 2000 Apr-30 Retained Earning Dividend 2000

6b Jiro Nozomi, Capital 01/04 60000 01/04 24/04 2000 1500 Computer Equipment 250001 01/04 23001 End Bal. 60000 End Bal. 25000 Cash 3500002/04 16000 03/04 10/04 14/04 28/04 29/04 30/04 30/04 39050 1100 1100 400 1550 2000 Office Supplies 1500 30/04 03/04 700 16000 End Bal. 800 Commissions Earned 24/04 30/04 End Bal. End Bal. 2200 18200 Prepaid Insurance 2300 30-Apr 21721 29/04 End Bal. Repairs Expense 400 400 10/04 End Bal. 128 30/04 End Bal. Dividend 20001 2000 30/04 End Bal. Telephone Expense 1550 1550 Salaries Expense 1100 1100 440 2640 14/04 28/04 30/04 End Bal. Office Supplies Expense 30/04 7001 Depreciation Expense-Computer Equipment 500 End Bal. 500 30-Apr End Bal. 700 02/04 End Bal. Rent Expesne 2000 2000 Insurance Expense 30-Apr 128 End Bal. 128 Accumulated Depreciation - Computer Equipment 30-Apr 500 End Bal. 500 Salaries Payable 30/04 End Bal. 4401 30/04 End Bal. Account Receivable 22001 2200 440

7 Adventure Travel Post Closing Trial balance April 30, Credit ($) Account Titles Cash Account Receivable Office Supplies Prepaid Insurance Computer Equipmen Jiro Nozomi, Capital Salaries Payable Retained Earning Total Debit ($) 39050 2200 800 2172 24500 60000 440 8282 68722 68722

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