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 $43,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
		2		The company rented furnished office space by paying $2,600 cash for the first month’s (April) rent.
		3		The company purchased $1,400 of office supplies for cash.
		10		The company paid $2,800 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
		14		The company paid $900 cash for two weeks' salaries earned by employees.
		24		The company collected $14,500 cash for commissions earned.
		28		The company paid $900 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 $1,250 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. Prepaid insurance of $156 has expired this month.
2. At the end of the month, $500 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $400.
4. Employees earned $400 of unpaid and unrecorded salaries as of month-end.
5. The company earned $1,950 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

Adventure Travel Reg 1 Journal entries Date Account 1-Apr Cash Computer Equipment Common Stock Credit Debit $ 43,000 $ 25,000 $ 68,000 2-Apr Rent Expense Cash $ 2,600 $ 1,400 3-Apr Office Supplies Cash $ 1,400 $ 2,800 10-Apr Prepaid Insurance Cash $ 2,800 $ 900 14-Apr Salaries Expense Cash $ 900 $ 14,500 24-Apr Cash Commissions Earned $ 14,500 $ 900 28-Apr Salaries Expense Cash $ 900 $ 500 29-Apr Repairs Expense Cash $ 500 $ 1,250 30-Apr Telephone Expense Cash $ 1,250 $ 1,800 30-Apr Dividends Cash $ 1,800

Adventure Travel Req 2, 6b T Accounts Date Debit Date Cash 1-Apr $ 43,000 24-Apr $ 14,500 Credit Date Credit Credit Date Credit Debit Date Accounts Receivable Date Debit Date Office Supplies 3-Apr $ 1,400 Debit Date Prepaid Insurance 10-Apr $ 2,800 2-Apr $ 2,600 3-Apr $ 1,400 10-Apr $ 2,800 14-Apr $ 900 28-Apr $ 900 29-Apr $ 500 30-Apr $ 1,250 30-Apr $ 1,800 Unadj Bal. $ 45,350 Unadj Bal. $ 1,400 Unadj Bal. $ 2,800 Unadj Bal. Apr 30 Adj $ $ 1,950 Apr 30 Adj $ 900 Apr 30 Adj $ 156 Adj Bal. $ Adj Bal. $ 2,644 Adj Bal. $ 45,350 Computer Equipment 1-Apr $ 25,000 Adj Bal. $ 1,950 Accum. Depr. - Computer Equip 500 Salaries Payable Unadj Bal. $ 25,000 Unadj Bal. Apr 30 Adj $ $ . 400 Unadj Bal. Apr 30 Adj $ $ . 400 Adj Bal. $ 400 $ 400 $ 25,000 Common Stock 1-Apr $ 68,000 Adj Bal. Retained Earnings Adj Bal. Dividends 30-Apr $ 1,800 Income Summary Unadj Bal. $ 68,000 Unadj Bal. S . Unadj Bal. $ 1,800 Unadj Bal. S - Adj Bal. $ 68,000 Adj Bal. $ 1,800 Adj Bal. $ . Apr 30 Close $ 1,800 Apr 30 Close $ 8,444 Adj Bal. Apr 30 Close $ 1,800 Apr 30 Close $ 8,006 Apr 30 Close Apr 30 Close $ 8,444 $ . $ 16,450 Bal. Bal. $ $ 68,000 Commissions Earned 24-Apr $ 14,500 $ 6,644 Depreciation Expense-Computer Equip. Insurance expense 14-Apr $ 28-Apr $ Salaries expense 900 900 Unadj Bal. Apr 30 Adj $ 14,500 Unadj Bal. $ 1,950 Apr 30 Adj $ $ - 400 Unadj Bal. $ 1,800 Apr 30 Adj $ 400 Unadj Bal. Apr 30 Adj $ $ . 156 Adj Bal. $ 16,450 Adj Bal. $ 400 Adj Bal. $ 2,200 Adj Bal. $ 156 Apr 30 Close $16,450 Apr 30 Close $ 400 Apr 30 Close $ 2,200 Apr 30 Close $ 156 $ - Bal Bal. Office Supplies Expense Rent expense 2-Apr $ 2,600 29-Apr $ Repairs Expense 500 Telephone Expense 30-Apr $ 1,250 Unadj Bal. $ 2,600 Unadj Bal. $ 500 Unadj Bal. $ 1,250 Unadj Bal. Apr 30 Adj $ $ - 900 Adj Bal. $ 2,600 Adj Bal. $ 900 Adj Bal. $ 500 Adj Bal. $ 1,250 Apr 30 Close $ 2,600 Apr 30 Close $ 900 Apr 30 Close $ 500 Apr 30 Close $ 1,250 Bal. $ - Bal. Bal. $ Bal. $ .

Reg 3 Unadjusted TB Debit Credit 45,350 1,400 2,800 25,000 68,000 Adventure Travel Account Names Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation-Computer Equip. Salaries Payable Common Stock Retained Earnings Dividends Commissions Earned Depreciation Expense-Computer Equip. Salaries expense Insurance expense Rent expense Office Supplies Expense Repairs Expense Telephone Expense Totals 1,800 14,500 1,800 2,600 500 1,250 82,500 82,500

Req4 Adjusting entries Date Account 30-Apr Insurance expense Prepaid Insurance Credit Calculation Debit $ 156 $ 156 $ 900 =1,400-500 30-Apr Office Supplies Expense Office Supplies $ 900 30-Apr Depreciation Expense-Computer Equip. Accumulated Depreciation-Computer Equip. $ 400 $ 400 30-Apr Salaries expense Salaries Payable $ 400 $ 1,950 30-Apr Accounts Receivable Commissions Earned $ 1,950

Req4 Credit Debit 45,350 1,950 500 2,644 25,000 400 400 68,000 Adventure Travel Account Names Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation-Computer Equip. Salaries Payable Common Stock Retained Earnings Dividends Commissions Earned Depreciation Expense-Computer Equip. Salaries expense Insurance expense Rent expense Office Supplies Expense Repairs Expense Telephone Expense Totals 1,800 16,450 400 2,200 156 2,600 900 500 1,250 85,250 85,250

16,450 Req 5a Adventure Travel Income Statement For Month Ended April 30 Revenues Commissions Earned Expenses Depreciation Expense-Computer Equip. Salaries expense Insurance expense Rent expense Office Supplies Expense Repairs Expense Telephone Expense Total Expenses Net Income 400 2,200 156 2,600 900 500 1,250 8,006 8,444 Statement of Retained Earnings For Month Ended April 30 Retained Earnings, April 1 Add: Net Income 8,444 8,444 (1,800) 6,644 Less: Dividends Retained Earnings, April 30

Reg 5c Adventure Travel Balance Sheet April 30 Assets Current Assets Cash Accounts Receivable Office Supplies Prepaid Insurance Total Current Assets 45,350 1,950 500 2,644 50,444 Property, Plant & Equipment Computer Equipment Accumulated Depreciation-Computer Equip. Total Property, Plant & Equipment Total Assets 25,000 (400) 24,600 75,044 Liabilities & Stockholders Equity Current Liabilities Salaries Payable 400 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 68,000 6,644 74,644 75,044

Req 6a Closing entries Date Account 30-Apr Commissions Earned Income Summary Credit Debit $ 16,450 $ 16,450 $ 8,006 30-Apr Income Summary Depreciation Expense-Computer Equip. Salaries expense Insurance expense Rent expense Office Supplies Expense Repairs Expense Telephone Expense $ $ $ $ $ $ $ 400 2,200 156 2,600 900 500 1,250 $ 8,444 30-Apr Income Summary Retained Earnings $ 8,444 $ 1,800 30-Apr Retained Earnings Dividends $ 1,800

Adventure Travel Account Names Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation-Computer Equip. Salaries Payable Common Stock Retained Earnings Dividends Commissions Earned Req7 Post Closing TB Debit Credit 45,350 1,950 500 2,644 25,000 400 400 68,000 6,644 Salaries expense Insurance expense Rent expense Office Supplies Expense Repairs Expense Telephone Expense Totals 75,444 75,444