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 $30,000 cash and computer equipment worth $20,000 in the company.
2 The company rented furnished office space by paying $1,800 cash for the first month's (April) rent.
3 The company purchased $1,000 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 $1,600 cash for two weeks' salaries earned by employees.
24 The company collected $8,000 cash on commissions from airlines on tickets obtained for customers.
28 The company paid $1,600 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 $750 cash for this month's telephone bill.
30 Nozomi withdrew $1,500 cash from the company for personal use.
The company's chart of accounts follows:

101 Cash 106 Accounts Receivable 124 Office Supplies 128 Prepaid Insurance 167 Computer Equipment 168 Accumulated Depreciation-Computer Equip. 209 Salaries Payable 301 J. Nozomi, Capital 302 J. Nozomi, Withdrawals 405 Commissions Earned 612 Depreciation Expense-Computer Equip. 622 Salaries Expense 637 Insurance Expense 640 Rent Expense 650 Office Supplies Expense 684 Repairs Expense 688 Telephone Expense 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 $420 of unpaid and unrecorded salaries as of month-end.

The company earned $1,750 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

Answer:

1) JOURNAL ENTRY

April 01  Debit Bank $30,000 Debit Equipment $20,000 Credit Capital Account $50,000

April 02 Debit Rent Expense $1,800 Credit Bank $1,800

April 03 Debit Office supplies Account $1,000 Credit Bank $1,000

April 10 Debit Prepaid Insurance $2,400 Credit Bank $2,400

April 14 Debit Salaries Expense $1,600 Credit Bank $1,600

April 24 Debit Bank $8,000 Credit Commission $8,000

April 28 Debit Salaries Expense $1,600 Credit Bank $1,600

April 29 Debit Repairs $350 Credit Bank $350

April 30 Debit Telephone Expense $750 Credit Bank $750

             Debit Drawings $1,500 Credit Bank $1,500

2) GENERAL LEDGER ACCOUNTS

DR                                    101 Cash                                                 CR

01 Capital                    30,000         02    Rent expense                   1,800

24 Commission           8000           03    Office supplies                  1,000

                                                         10     Insurance                           2,400

                                                         14     Salaries                              1,600

                                                         28   Salaries                               1,600

                                                         29   Repairs                                  350

                                                         30   Telephone                            750

                                                                 Drawings                            1,500

                                                                 Balance C/D                       27,000

                                    38,000                                                             38,000

                                              124 Office Supplies

03 Bank                         1,000

                                              128 Prepaid Insurance

10 Bank                         2,400

                                               167 Computer Equipment

01 Capital                      20,000

                                              301 Capital

 balance c/d             50,000         01 Bank                                 30,000

                                                            Equipment                       20,000

                                 50,000                                                        50,000

                                             302 Drawings

30 Bank                   1,500

                                             405 Commission Earned

                                                         24 Bank                              8,000

                                             622 Salaries Expense

14 Bank                     1,600                    

28 Bank                    1,600

                                       640 Rent Expense

02 Bank                   1,800

                                      684 Repairs

29 Bank                    350

                                      688 Telephone Expense

30 Bank                    750

3) UNADJUSTED  TRIAL BALANCE                         DR                CR

Balance sheet section

Capital                                                                                           50,000

Drawing                                                                   1,500

Cash                                                                        27,000

Office supplies                                                       1,000

Prepaid expense                                                    2,400

Computer Equipment                                            20,000

Nominal Accounts section

Commission Earned                                                                       8,000

Salaries expense                                                 3,200

Rent Expense                                                       1,800

Repairs Expense                                                     350

Telephone Expense                                              750

TOTALS                                                               58,000              58,000

4) ADJUSTING ENTRIES

31 April

    Debit Insurance expense $133 Credit Prepaid insurance $133

    Debit office supplies expense $400 Credit Office supplies account $400

    Debit Depreciation $500 Credit Accumulated depreciation $500

    Debit Salaries expense $420 Credit Salaries Payable $420

    Debit Accounts Receivable $1,750 Credit Commission Earned $1,750

ADJUSTED TRIAL BALANCE                                  DR                  CR

Balance sheet section

Capital                                                                                           50,000

Drawing                                                                   1,500

Cash                                                                        27,000

Accounts Receivable                                               1,750

Office supplies (1000-400)                                         600

Prepaid expense (2,400 -133)                                  2,267

Computer Equipment                                              20,000

Accumulated Depreciation on equipment                                   500

Salaries Payable                                                                             420

Nominal Accounts section

Commission Earned (8,000 + 1,750)                                            9750

Depreciation expense                                            500

Salaries expense  (3,200 +420)                          3,620

Insurance expense                                                  133

Rent Expense                                                       1,800

Office Supplies Expense                                        400

Repairs Expense                                                     350

Telephone Expense                                              750

TOTALS                                                               60,670              60,670

5 a) INCOME STATEMENT FOR APRIL

Commission earned                                                      $9,750

minus total Expenses                                                  - $7,553

Depreciation                                      500

Salaries expense                             3,620

Insurance Expense                           133

Rent Expense                                 1,800

Office Supplies Expense               400

Repairs Expense                            350

Telephone Expense                      750

Net Income                                                                   $2,197

b) Statement of Owners Equity

opening Balance                                   50,000

Add Net income                                       2,197

minus Drawings                                      -  1,500

Closing Balance                                   = $50,697

c) Balance Sheet at 30 April 2017

Asset      

Non_Current Asset                                                         $19,500

Equipment at Carrying Value (20,000-500)                 $19,500

Current Asset                                                                  $31,617

Accounts receivable                                                       $1,750

Office supplies (1000-400)                                             $   600

Prepaid expense (2,400 -133)                                         $2,267

Cash                                                                                  $27,000

Total Assets                                                                     $51,117

Equity and Liabilities

Equity                                                                               $50,697

Liabilities

Current Liabilities                                                            $420

Salaries Payable                                                              $420

Total Equity and Liabilities                                             $51,117

6 a) JOURNAL ENTRIES

       Debit Capital Account $1,500 Credit Drawings $1,500

Debit Commission earned $9,750 Credit Income summary account $9,750

Debit Income Summary Account $500 Credit Depreciation $500

Debit  Income summary account $3,620 Credit Salaries Expense $3,620

Debit Income summary Account $133 Credit Insurance Expense $133

Debit Income summary Account $1,800 Credit Rent Expense $1,800

Debit Income Summary Account $400 Credit Office supplies Expense $400

Debit Income Summary Account $350 Credit Repairs expense $350

Debit Income Summary Account $750 Credit Telephone expense $750

Debit Income Summary Account $2,197 Credit Capital Account $2,197

b) Closing Temporary Accounts

                                       302 Drawings

30 bank                       1,500         Capital Account               1,500

                                      405 Commission Earned

Income summary account $9,750     24 Bank                                   8,000

                                                             30 Accounts Receivable        1750

                                      612 Depreciation

30 Accumulated depreciation $500     income summary account $500

                                      622 Salaries Expense

 Bank                         3,200               Income summary account   $3,620

Salaries payable           420

                                        637 Insurance Expense

Prepaid expense            $133       Income summary account             $133

                                       640 Rent Expense

Bank                               $1,800      Income summary Account            $1,800

                                       650 Office Supplies Expense

Office supplies Account   $400      Income summary Account           $400

                                    684 Repairs Expense

Bank                           $350              Income summary Account         $350

                                    688 Telephone Expense

Bank                           $750             Income Summary Account         $750

                                         901 INCOME SUMMARY ACCOUNT

Depreciation                    $500             Commission Earned         $9,750

Salaries Expense             $3,620

Insurance Expense          $133

Rent Expense                  $1,800

Office supplies                $400

Repairs Expense             $350

Telephone                       $750

Capital Account              $2,197

Total                                $9,750                                                        $9,750

7) POST CLOSING TRIAL BALANCE                             DR                   CR

Balance sheet section

Capital Account                                                                                  50,697

Cash                                                                              27,000

Accounts Receivable                                                      1,750

Office supplies                                                                  600

Prepaid expense                                                            2,267

Equipment at Carrying Value                                      19,500

Salaries Payable                                                                                     420

TOTAL                                                                           51,117                51,117

Explanation: